4 Ways to Determine if Your Financial Advisor is Protecting Your Wealth

Prior to selecting a financial advisor, it is important to have a clear understanding of the firm you are hiring and their investment philosophy. Gill Capital Partners would like to share four areas for you to consider in choosing the most strategic financial advisor for your investment goals: 1. Work with Certified Financial Planners® and Registered Investment Advisors

There are a number of different credentials and certifications financial planners can claim, but the most significant and respected is Certified Financial Planner (CFP®). CFPs are required to pass rigorous exams and must continue with financial and ethics education to maintain their certification.

For an added level of protection, seek financial advisors who are also Registered Investment Advisors (RIAs).  An RIA is a financial professional who has pledged to act only in the best interests of the client. Those in the financial industry, even if they are CFPs, are held to less exacting standards than RIAs.

 2. Understand How Your Financial Advisors are Paid

Generally speaking, financial advisors earn their income in one of three ways:

  1. They earn a commission when they buy or sell an investment for a client.
  2. They charge an hourly rate or a flat fee, similar to an attorney.
  3. They charge a percentage of the overall total value of your investments.

Understanding the details of each fee structure is critical.

Most in the financial service industry will caution against commission-based fee structures. The reason for this is the financial advisor may not act in your best interest in buying or selling a particular investment if it means more or less income for them.

Some investors prefer a flat fee or an hourly rate as it gives the added comfort that the financial advisor’s counsel is based on what is best for stated investment goals and not for their bottom line. The drawback to this could be a large running tally of charges for smaller accounts and investors may be concerned about reaching out for advice knowing they will be charged.

Gill Capital Partners will help clients choose their preferred fee model, but believes charging a percentage of overall investment value most appropriately aligns the interests of the client and the advisor.

3. Research and Verify Credentials

Finding a firm with an in-house CFP that also acts as an RIA greatly assists in ensuring you are getting the most thorough and ethical financial advice available, but it is not a guarantee. Verifying credibility with friends, family and colleagues, as well as with industry resources can give an added level of reassurance.

In asking for references for financial advisors, ask those who are in similar financial situation as you. If you are looking for the best way to leverage your investments to pay for your child’s upcoming college tuition, ask those who are in a similar situation. If you want to secure a financial advisor to plan for the final stages prior to your retirement, ask for a referral from someone who is in a similar stage of life.

You can also check regulatory entities and national associations such as Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and the Financial Planning Association (FPA).Be sure to ask the financial advisor for references from other clients with similar investment goals to you and confirm they have never been convicted of a crime or been found guilty by a regulatory entity or industry group.

4. If it Sounds too Good to Be True, It is

What financial advisors promise and what they deliver can, unfortunately, can be two very different things. Be wary of any advisor who touts beating the market. Instead, look for an investment partner who understands your investment goals, will work to understand your risk tolerance and will diligently and ethically help you obtain your desired investment outcome.

Do you have a trusted Denver financial advisor? Call Gill Capital Partners at 800-288-3777, if you would like to learn about The Gill Capital Difference.



BlogJames O'Brien