How to Choose a Financial Adviser in Today's Economy

Chrisdavy
Chrisdavy, Yahoo! Contributor Network
Dec 23, 2009 "Share your voice on Yahoo! websites. Start Here."
Though Bernie Madoff and other fake investors shook our faith, many of us still don't have the time to manage our money ourselves. We also don't have the money to attract the top tier professional investors, so we have to do the best we can with the more commercial services offered by banks and financial advisers. Though I always think it best to manage your own money, here is my process from experience which works best when you have to let someone else do it.
  1. Step 1
    • YOU WANT AN IFA. Let me repeat - you want an IFA -- an INDENPEDENT Financial Adviser. This is the only way that you can insure you're getting service without the conflict of interest which is absolutely the norm when you're talking about those "Certified Financial Planners" (CFPs) you see running around your local Chase, Wells Fargo or Bank of America. STAY AWAY FROM THEM. They are like the McDonald's of financial planners. Also, stay away from commission based planners who are "multi-tied" -- meaning they don't work for just one bank; they work for many and will choose your investments based on those for whom they work. Still a conflict of interest.
    • Step 2

      LOOK AT THEIR CREDENTIALS. You're NOT looking for a CFP. From my conversations with CFPs, seems like anybody can get that. You want a CFA. Might cost a little more, but hey, if you don't have enough to pay them, you don't have enough to invest. See my eHow on "How to Get A Job."

    • Step 3

      WHERE TO LOOK ONLINE FOR AN IFA WHO IS A CFA. Your (rich) friends, obviously, are the first place to ask for references here. But if you don't have any rich friends, PaladinRegistry.com is the place I trust. You put in info about what you need, and they have people call you. Otherwise, just Google "find a financial adviser." It's not important WHERE you find them, because you're going to gut them in the next 2 steps anyway.

    • Step 4

      ASK QUESTIONS. A financial adviser's job, believe it or not, is NOT to help you pick the next Microsoft or Intel or make you the next Buffett or Peter Lynch. They really are more there to tell you how NOT to be Kramer from Mad Money, and let the natural market flow get you your returns. You MIGHT hit a home run, but the right person will INSURE your personal economic stability. And more importantly, they are there to calm you down during the bad times so you don't sell out and lose all the hard work and momentum. So, when you grill the hell out of them, asking them every question you can think of about their investment strategy, you must remember that THEY work for YOU. If they can't explain themselves simply, or if their strategy sounds prima facie tarded, move on to the next guy.

    • Step 5

      COMPARE AND CONTRAST. Just like I recommended with online brokers, I recommend a trial period. Give money to your top two picks and see how they do. Try to give them the same amount each, but judge them by percentage gain as opposed to risk taken, not just actual dollars made. Just because one guy does better one year does not mean he's automatically the best for your long term financial health.

Published by Chrisdavy

AC's licentious, guilty pleasure. What can I say? I write about sex and money. You know, the important stuff. Giggle. (But I do it so well!) Fashion, too. LOL  View profile

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