Choosing Financial Professionals Wisely.
December 20, 2010 by moneyprovidesfreedom
If you been thinking about hiring a financial professional but don’t want to get ripped off (think Bernie Madoff), then this article’s for you.
- Identify areas you need help and then decide which professional groups would be best suited to help. Different financial professionals have different areas of expertise. One size does not fit all.
|Area of Need
|Asset allocation, college planning, getting out of debt
|Buying bonds or stock trades
||Attorney, Financial Planner
|Retirement planning, IRA accounts
||Financial planner, Broker
||CPA, EA (Enrolled Agent)
- Create a list of potential candidates through referrals. Use professional referrals, employer referrals (EAP), and personal referrals. Possible referrals services include: Certified Financial Planner Board of Standards, Inc (www.cfp.net) and Financial Planning Association (www.fpanet.org).
- Develop a list of questions that must be answered before you hire someone. Interview questions include (at the least): How much training and experience do you have? How long have you been in this profession? What professional credentials do you have? How many clients do you have? What’s the profile of your typical client? How are you paid (fees, commission, both)? Will I be working with you directly or a junior member of the firm? Have you ever been reprimanded or disciplined by regulatory or industry bodies? Do you have references that I may contact?
- Interview the candidates, check references, and research the professional’s background. Due diligence is required here. Hire professionals who have recognized credentials (CPA, CFP, CFMA, MFP, etc) in their specialized field. Not all credentials are created equally and some are quite dubious (i.e. certified “senior” advisor).
- Watch out for red flags. Possible red flags are when someone avoids answering questions about his professional background, offers investment products before asking you for basic financial information, sells penny stocks or claims insider knowledge, trades investments without informing you, or if it sounds too good to be true it probably is.
- Hire the most suitable professional.