Personal Financial Advisers

Good Personal Financial Advisers can be found in many places, including financial planning firms, independent financial planners, insurance brokers, brokerage firms, banks, insurance companies, accounting firms and law firms. The key is finding the adviser you can trust, not necessarily the type of organization.

You can start the process by contacting friends and family members who have similar personal financial situations and ask them to refer you to someone that they have used. It will then be up to you to make sure that the adviser is qualified to provide the advisory services you need.

In addition to (or instead of) referrals from friends or family, you can usually find Personal Financial Advisers in your neighborhood. This process is more tedious but can be more reliable if done properly and thoroughly. Use any or all of the following sources:

• An accountant or lawyer whom you trust.
• The International Association for Financial Planning (IAFP): 800-945-4237.
• The Institute of Certified Financial Planners (ICFP): 800-282-7526.
• The Internet: Dalbar will maintain an on-line directory of financial advisers at http://www.dalbar.com.
• The National Association of Personal Financial Advisors (NAPFA).
• Your local state society of CPAs.
• Your local phone book under "Financial Planning" or "Investment Services." A word of caution: fee-only oftentimes can be a misleading term and consumers ought not to select an adviser based solely on the method of compensation; competence and ethics are equal if not more important criteria.

Contact the information sources of your choice and ask about personal financial advice. Find at least three to six advisers who are near your work or your home and who deal with people who have similar financial issues as you do.

The next step is to choose one that is able to meet your needs. Review the list of 12 elements of advice described in the previous chapter and decide which ones are important to you. Ask each candidate about these items and eliminate those who do not offer the services you need.

Professional designations and licenses are also helpful in determining qualifications in meeting your needs. (See Appendix for a more complete list of professional designations as well as requirements for becoming licensed by the National Association of Securities Dealers and state regulatory agencies.) Below is a list of the more common designations and licenses.

The Certified Financial Planner (ICFP) license is awarded to individuals who have fulfilled the certification and biennial licensing requirements of the CFP Board of Standards.

See Appendix for a further description.

The Certified Public Accountant (CPA) designation also requires rigorous training and testing in the field of accounting and taxes. CPAs are trained to validate financial records and provide guidance in the proper reporting of taxes. Many CPAs who specialize in financial planning also have a Personal Financial Specialist (PFS) designation.

The Chartered Financial Analyst (CFA) has undergone rigorous training and passed extensive tests that take several years to complete. CFAs are trained to understand the securities markets and evaluate the quality and worth of stocks, bonds and other securities.

The Chartered Financial Consultant (ChFC)
describes a financial planner or financial services professional who has earned the ChFC designation by completing The American College’s financial planning program covering economics, insurance, taxation, real estate and other topics related to finance and investing.

Meanwhile, the Chartered Life Underwriter (CLU) designation indicates that the individual has undergone the training required to assess insurability.

The most important job of a financial adviser is to make you comfortable with your financial situation. The adviser may suggest changes, but unless you feel comfortable with the person you probably won’t feel comfortable with his/her advice. Your adviser should have values that are similar to your own, and must be genuine in relating to your issues and concerns.

Excellence & Trust. The final step is to determine which candidates are qualified. Of course, you can determine whether an adviser is qualified on your own. Another way of doing this is to make sure the adviser meets the Dalbar qualifications.

Dalbar has undertaken to rate Personal Financial Advisers in a program called "Excellence & Trust". This program will identify those advisers who have demonstrated that they deliver value for their clients and who chose to participate in Dalbar’s "Excellence & Trust" program. Advisers pay Dalbar $500 per year to participate in the program, which is modeled after services that rate bonds, such as Standard & Poor’s and Moody’s.

The Dalbar standards for advisers are:

It may be impossible for you to learn any more than this on your own about an adviser who you are considering. However, Dalbar takes the rating process much further. Qualified advisers are then rated on the basis of how good a job they have done for their clients. Dalbar asks the clients to answer a series of questions about their adviser’s performance, including:

Beginning in 1998, you will be able to find an adviser who has undergone this level of scrutiny without having to undertake the effort yourself. Dalbar ratings will be available in electronic and paper format.