In developing your financial plan, a critical step is selecting an appropriate financial advisor. Generally speaking, financial services are provided by registered representatives, those who buy and sell securities through brokerage firms, agents who sell insurance products and individual practitioners who offer comprehensive financial planning. While all three groups may hold themselves out as financial planners, they may not have the same qualifications and adhere to the same standards. All advisors must make recommendations that are suitable and reasonable for the client. However, advisors who are licensed to offer fee-based services are held to a higher legal standard as a fiduciary, which requires any and all actions to be in the best interest of the client.
A second issue is the range of products an advisor may be able to offer. Agents who represent a specific company primarily offer one line of products. In comparison, independent advisors can offer products from several different companies, giving the client a broader selection of products. The scope of your financial plan will help you determine the type of advisor with whom you work.
Make sure you understand how the advisor is compensated, either by commission, by fee or a combination of both. You should also be made aware of any possible conflicts of interest that could arise during the engagement. Finally, ask the advisor to explain carefully his or her qualifications and credentials. Complete disclosure by the advisor and a mutual understanding of the client’s expectations are essential ingredients for building a healthy advisor/client relationship.
Marty Reid is a CERTIFIED FINANANCIAL PLANNER™ practitioner. Registered Representative of and Securities and Investment Advisory Services offered through Cetera Advisor Networks LLC, Registered Broker Dealer, Member FINRA/SIPC. Reid Financial and Cetera Advisor Networks are unaffiliated.