RIAs are held to the fiduciary standard, meaning they’re legally obligated to put your financial interests before theirs. Brokers, on the other hand, can invest your money in products that earn them higher fees or commissions as long as the product is deemed suitable for your age, risk tolerance and so on.
Some advisers are fiduciaries for money they manage for clients, but take commissions for selling products like annuities.
Know the credentials: One acronym you’ll see is CFP, for certified financial planner. CFPs must have a bachelor’s degree, do extensive coursework in areas including retirement and estate planning, pass two three-hour tests and have at least two years of experience with financial planning.
Another acronym to know is CFA, for chartered financial analyst. A CFA has expertise in investment management, so the designation may come into play if you want someone to manage money. The CFA Institute says it takes an average of more than 1,000 hours of study, and CFAs must pass multiple four- to five-hour exams and have four years of professional experience.
If you’re searching for help with student loans you may see the acronym CSLP — certified student loan professional. It’s not in the same league as CFPs and CFAs, but it shows someone has a good understanding of the complexities of student loans.
If you’re interested in tax advice, a certified public accountant (CPA) or enrolled agent (EA) may make sense. For help with life insurance and estate planning, a CLU, for chartered life underwriter, is a well-respected credential.
Check out the vibe: After you’ve zeroed in on a few planners, it’s time to set up a call. Some advisers offer first calls for free and others for a small fee.
Key questions to ask your prospective adviser include: Who is their typical client? What’s their philosophy about financial planning and investing? How will you meet (many planners are 100% virtual now) and how often? What do they charge? And a crucial question to ask yourself: Are they listening to you and asking good questions about your values and goals, or is it more of a sales presentation?
Jim Marrocco runs Thinking Big Financial, which specializes in LGBTQ customers. He starts every client relationship with a discovery period to better understand their history, values and vision. “Money is such an intimate thing that you want to feel comfortable in the environment where you’re talking about this,” Marrocco said.
Be clear on fees: The cost of advisers varies greatly, often depending on the complexity of your finances. Generally, they’re paid either by commissions on investments and products, or with a set fee. Those fees can be charged by the hour, month, quarter, year or by project. If you want someone to manage money, as opposed to help you with a financial plan, they’ll charge a percentage of assets managed.
Rates vary widely depending on the planner’s experience, areas of expertise and the depth and length of the engagement, said Jeff Jones, director of financial planning at Longview Financial Advisors and chair of the National Association of Personal Financial Advisors. He’s seen hourly rates range from $100 to $500, and said project-based and flat fees can range from hundreds to tens of thousands of dollars.
This article was provided by Bloomberg News.