How to Hire a Financial Advisor

By Lori Murray, Manta Contributor - March 6, 2017

How to Hire a Financial Advisor

Learn what questions to ask when hiring a financial professional to help protect and grow your personal and business assets.

Many small business owners mistakenly think of their personal assets and business assets as one and the same. But protecting and growing your personal assets independently of your investment in your business is essential to ensuring your financial future.

To accomplish your goals, it helps to hire a financial advisor who can provide sound advice. Not sure where to begin? These tips should help.

Choose Someone Who Understands Small Business

“Small business owners need a financial advisor who will put the best interest of the business owner first, and has the expertise to accomplish that. He or she should be able to help with business cash flow and taking advantage of tax strategy as a business owner,” said Ted Halpern, founder of Halpern Financial Inc. in Rockville, Maryland.

Look for a financial advisor who understands your unique situation, which, for many small business owners, may include succession planning. When selecting an advisor, don’t hesitate to ask questions about their experience, including the types of clients they’ve worked with in the past.

Check Their Credentials

Start by looking for someone who has advanced designations within the field and someone who will take a fiduciary role, meaning that his or her advice is always based on the client’s best interest.

If you need a consultant, look for the CFP designation, which stands for certified financial planner. These individuals must pass a rigorous test related to personal finance, and they are committed to continuing education. Keep in mind that some professionals may have multiple designations, such as CFP and CPA (certified public accountant), for instance, which could be helpful depending on your situation.

Remember that it’s up to you to ask the tough questions about their qualifications. If you’re not sure where to begin, check the National Association of Personal Financial Planners website or the Garrett Planning Network. The latter includes a downloadable financial advisor interview questionnaire.

Find Out How They Get Paid

While choosing a fee-only advisor is probably the safest bet, keep in mind that in addition to charging a fee for their services, some fee-based advisors may also charge a commission for selling certain financial products. A commission is not necessarily a bad thing, but realize that individuals who work on commission may be financially incentivized to sell a particular product, which may not meet your needs.

“Understand how they are compensated,” said Dana Anspach, founder and CEO of Scottsdale, Arizona-based Sensible Money, LLC. “Does this person only make money when they invest in something, or are they paid a fee or hourly rate?”

Certified financial planners who are members of the National Association of Personal Financial Planners (NAPFA) are fee-only advisors and cannot sell commission products. “I think this is very important if you want someone in that consultant role,” Anspach added. “It’s not important if you’re just looking for a transaction, like setting up a SIMPLE IRA plan.”