First you need to ask yourself what you mean by the term financial advisor. Sometimes financial advisor and financial planner are used synonymously. We use financial advisor primarily in the sense of investment advisor. If you’re in a crisis mode or simply living from paycheck to paycheck, you’re probably not ready to begin thinking about investments. It’s only as you become more affluent that you need direction and guidance in this area.
A financial planner, on the other hand, is a person who is paid a fee specifically to help you come up with a financial plan. Everybody needs a financial plan, no matter where they fall along the economic spectrum. But they don’t necessarily need a financial planner. The financial planning industry is largely unregulated, and anyone can claim to be a professional advisor. Unfortunately, most so-called financial planners have no real training or expertise. They’re really salespeople. So if you’re just looking for help preparing a budget, we’d suggest that you read books on the subject and do it yourself, or contact your church to see if anyone in the congregation is able to help you.
If you are seriously in need of assistance with investments – that is, if your income is $100,000.00 or more per annum or you have more than $50,000.00 in investments – you should start interviewing prospective candidates. There are seven criteria you’ll want to keep in mind as you go through the process of selecting a qualified professional. The first four are must-haves. If the advisor you’re interviewing doesn’t meet any one of these, you should eliminate that person from consideration. The last three are important criteria, but they may not be essential. The criteria are as follows:
- Technical expertise. To determine technical expertise, ask questions such as, “What degrees have you earned?” “What type of training have you had relative to my particular situation?” and “Have you ever been sued? If so, tell me the circumstances.” You may also want to search the Financial Industry Regulatory Authority (FINRA) website for any complaints or proceedings against the advisor. You could also ask if he or she has ever been used as an expert witness in a legal proceeding.
- Experience with similar clients. Here you might begin by asking, “Who are some other clients similar to me?” “What are some of the facts involved?” “What were the results in those situations?” You might also inquire about previous positions the candidate has held.
- Wisdom and judgment. In discerning whether an advisor has wisdom and judgment, it would be helpful to know whom he or she relies on for advice. That would tell you whether he or she feels self-sufficient or understands that gathering wisdom is a continuous process. You might also ask, “Can you tell me about your family?” Professionals who spend a lot of time working and little time with family cut themselves off from important opportunities to gain wisdom.
- Worldview and like-mindedness. Your worldview is important in shaping how you approach handling your money. It’s important, then, that your values and convictions should mesh as closely as possible with your advisor’s. Ask questions such as, “What’s the biblical teaching on the issues we’re discussing?” Ask about personal goals and why he or she chose to work in this field. The goal is to match the advisor’s philosophies with your specific needs.
- Fees. The greatest barrier to a satisfactory working relationship with an advisor is unrealistic expectations regarding fees. A professional who operates with integrity is never reticent to discuss fees. The guiding principle here is balance. Charges should accurately reflect the value of the service given and received.
- Service. It’s also important to know how an advisor will work with you. Creating realistic expectations is vital for a harmonious relationship. Ask potential advisors questions like, “How soon can I expect my telephone calls or emails to be answered?” “What is the turnaround time on this project?” and “How do you choose the staff assigned to my case?”
- Location. Finally, consider the location of your advisor. If frequent face-to-face meetings are needed, proximity is important. On the other hand, if most of your business can be conducted over the phone or with email, even an out-of-town advisor can provide good service.
After the interview process is completed, you’re ready to check the references of those advisors in whom you’re still interested. You should also ask them to send you an engagement letter spelling out several things: how your account will be serviced, the fees agreed upon, and the length of the engagement. An ending point should be specified so you’re not committing yourself to work with a given advisor perpetually, and the term should be no longer than one year.
If you need help locating a qualified Christian financial professional in your area, visit the website of Kingdom Advisors. Or if you have relationship concerns and challenges associated with this situation, please don’t hesitate to give our Counseling department a call.
How to Choose a Financial Advisor: Ron Blue shares five characteristics to consider when choosing a financial advisor.
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Family and Personal Finances (resource list)
Money and Finances