The financial advice field is a bit convoluted, but this guide can help.
Financial Advisor Fees/Costs
First, there’s how you pay for advice. All financial advice has a cost, but sometimes it’s explicit (e.g., you can see it), and sometimes it’s only implicit (e.g., it’s embedded inside a financial product, and what you’re paying is not easily visible).
Most financial advisors today describe themselves as fee-based advisors. Legally, this means they can (and generally do) perform their activities in two ways: they earn a commission on certain product sales, and a fee on certain investments. The title is a bit misleading in this way, but the moniker persists.
We think this creates a conflict of interest: it often causes (even if only subconsciously) the financial advisor to recommend things that pay them the best compensation over what is in the client’s best interest.
Because of this inherent conflict, a special sub-set of financial advisor was born: the fee-only financial advisor. We recommend anyone seeking financial advice only work with a fee-only advisor.
A national organization lists and ensures fee-only compliance for all of its members; it’s called the National Association of Personal Financial Advisors (NAPFA), and it has an online directory of all of its members. So, for example, you can search for a list of all the fee-only financial advisors in Omaha, NE or the San Francisco, CA Bay Area (cities where we have offices).
Find a Specialist for Your Situation
Now that we’ve ensured you’re working with a fiduciary looking out for your best interest, you still need to find someone best suited for your situation.
The NAPFA directory tool helps with that a bit, but perhaps only in a superficial way. Think of a Certified Financial Planner professional (CFP) as a primary care physician, where they’re a generalist in almost every topic of financial advice: general personal financial planning, retirement, investments, income taxes, insurance, estate planning, and more.
Some CFP professionals also have additional emphasis or background in specific areas and are worth further investigation to find a good fit for you. For example, our team has several CFP professionals that have special emphasis in areas of investment science, retirement decision-making, interpersonal family dynamics, decision-making, life planning and coaching, and income tax planning and preparation.
These details are perhaps best found in your online research and one-on-one interviews before making your decision to hire your financial advisor/financial planner.
William is a Certified Financial Planner™ practitioner, a Chartered Financial Analyst charterholder, and a Registered Life Planner™. He serves as President and Chief Investment Officer at Callahan Financial Planning Company in San Francisco, Mill Valley, and San Rafael, CA, Denver, CO, and Omaha and Lincoln, NE.