Choosing an Advisor: Qualifications and Experience

In a recent column, we covered almost two dozen questions you might ask when looking for the right advisor. Now, let’s go about helping you figure out the answers.

This isn’t the easiest task, because your reaction to the answers given will be based partly on your own intuition and partly on how you prioritize the questions. If, for example, experience is the single most important attribute to you, it may not necessarily concern you if the advisor charges higher fees, or if she isn’t licensed to sell life insurance. Yet, there are some common concerns you should look for.

Experience

1. How long have you been an advisor?

2. Have you worked with dentists before? Other people at my income level? Those who face similar life and career situations?

3. Are you specialized in any specific area of financial advice?

4. Do you have references I could contact?

5. Will I be working only with you, or will you refer me to others at your company if there are areas in which you lack expertise or licensure?

Some of the above questions will be more important to you than others. Overall, though, you may want to work with advisors who have worked with dentists before, particularly if you own your own practice. Why? Because being a business owner can sometimes seem to be at odds with being an investor; there is always the question of how much income to re-invest in the business versus how much to set aside for your future retirement needs.

Also, people around your income level often have similar goals and similar amounts to invest. An advisor who has a feel for that isn’t likely to waste your time—a precious resource in its own right—on exotic or risky investments you’re unlikely to be in the market for. Equally important, an advisor used to working with the super-rich may not be inclined to devote much time and attention to your portfolio.

Specialization will be important to you if you’re looking for a full suite of financial products, such as variable annuities, or truly advanced investment vehicles, such as hedge funds. Life insurance investments require supplemental licensure that not all financial advisors have. If your advisor doesn’t have the credentials you’re seeking, that doesn’t have to be a deal-breaker. Most advisors have colleagues or partners to whom they refer if they don’t have the needed license.

Qualifications

6. What is your education level?

7. How do you stay current? For example, do you take continuing education courses and keep your licenses up to date?

8. Do you have any industry affiliations, awards, or other credentials you’d like me to know about?

The answers here are designed to get beyond the often-confusing initials that come after an advisor’s name to the truth about their background. The vast majority of advisors won’t make up or inflate their credentials, but because of the alphabet soup of initials around (CFP, CFA, CPA, ChFC…and many, many more), make sure the credentials your advisor lists are legitimate, and find out what kind of oversight he or she is subject to.

If you don’t know what the initials mean, ask. Ask, too, for the credentialing body. You’ll want to make sure that the advisor has at least a Series 7 license from the Financial Industry Regulatory Authority (FINRA). Even if the initials check out, take advantage of two highly useful tools: FINRA maintains its own invaluable tool, BrokerCheck, an exhaustive resource of any disciplinary history an advisor or broker may have; and the Securities and Exchange Commission has Investment Adviser Public Disclosure (IAPD) website. In a neat feature, the sites even cross-reference each other.

Ask for references, and don’t take no for an answer. You can also contact the Better Business Bureau to make sure that the advisor, and the firm he or she works for, have a clean record. The nefarious operators out there are rare, but you wouldn’t hire a babysitter for your children without doing some checking. The same should be true for the person you ultimately entrust to handle your finances.