How to Find an Advisor

Speaker On a plane ride the other day, I sat next to a young woman who asked me how she could find a pro to help manage an inheritance. Like most financial questions these days, this used to be easier to answer. Now in the wake of Bernie Madoff, they have to think harder. But here is how I'd answer it. Start by getting references. Now, I know you knew that. But most people ask friends. And the problem is your friends don't know whether their advisor is any good. They know whether they like him. But they can't judge his advice. So instead, get references from knowledgeable pros who routinely see the fruits of local financial advisors' work. That's your accountant or your lawyer or your friend's accountants or lawyers. Second, check credentials. The only ones that count are CFP for certified financial planner, ChFC for chartered financial consultant, and CFA for chartered financial analyst. Now, those officials aren't proof of competence or honesty. But they show that the person passed a fairly rigorous test and has something to lose if they misbehave. Any other letters strung after an advisor's name are either irrelevant or phoney. In fact, if any advisor makes a big deal of those other credentials, run away. Most important, make sure you understand how the advisor makes money. All of them want to sell you something, all. Some want to sell you products like annuities for commissions. Others want to sell you their services for a fee. The fee-only planner is probably less riddled with conflicts of interest, but they have them. Just make sure you know what they are. Finally, keep your expectations real. You're not going to find the next Warren Buffett. But if you choose well, you'll find someone who will keep you from doing something dumb. You want an advisor who encourages you to do the opposite of what your gut tells you. A planner who tells you to buy during a panic and to tell when you're sure you're about to get rich may not be a genius, but she's earning her pay.

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