How to find an independent financial advisor

Picking a financial advisor isn’t easy.

In an article published last week, Jason Zweig of the Wall StreetJournal wrote about Certified Financial Planners (CFP®) who falsely market themselves as fee-only but who are actually compensated by commissions from product providers. The setup could bias their advice.

Even when their statements are not purposefully misleading financial advisors can have a way of making terms more confusing. Like politicians debating the meaning of common words, much industry jargon I find is purposefully confusing to the public.

Consider the term “independent.” The average individual may think independent advisors are free to make whatever recommendations they believe are in your interest.

However, many who claim to be independentfinancial advisors are independent only when it comes to being paid for advice, if even that level of independence exists. Any advisor who is a broker or insurance agency, whether for the independentfinancial advisory firm or not, has limitations, guidelines, and rules on what products and strategies they can speak to you about.

Having experience at an “independent” financial advisor, who was had an affiliated insurance agency, and worked for an “independent” brokerage (brokerages sometimes also use this term, but it is even more misleading as my independent brokerage firm was owned by a large insurance company), I found my independence to offer financial planning and investing advice to have severe limitations put into place. Any objective observer would agree that when your advice is dictated by a product provider, you are not independent to do what you want for your client.

Given that most individuals value independence and qualified advice, how can you tell if your advisor is independent, fee-only, qualified, and a CFP® practicioner?

NAPFA-Registered Financial Advisors set the standard for qualification and professionalism among fee-only CFP® certificants. They are not allowed to create or be compensated by separate brokerages or insurance companies.

Also, unlike many other groups (and advisor certifications), NAPFA members:

  • Have CFP® certification which includes having at least 3 years of experience.

  • Must practice and show competence in comprehensive planning. They can not only provide investment services. NAPFA members must provide a comprehensive planning case for peer review.

  • Have strict continuing education requirements.

  • Sign a fiduciary oath to act in your best interest alone. There are no conflicts with product companies. There is no question if an advisor is compensated by product providers – we are not.

If you choose an advisor other than a NAPFA-Registered Financial Advisor, you will have to do your research. Read the advisors Form ADV2A (which is required to be delivered to clients). Look for company relationships that have an impact on compensation (note: most financial advisors will have some companies they work with listed in their ADV. Look for companies the advisor is working for compensation).

The preceding blog was originally published by Forbes. To view the original blog please visit our blog at Forbes.


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Detroit, Ann Arbor, and online fee-only, fiduciary financial advisor blog / podcast on retirement, investments, economy, taxes, 401k, 403b, Roth, IRAs