If you’re serious about growing your wealth, at one time or another, you will contract the services of a financial advisor. Let’s take a look at some of the factors you need to consider when hiring one in Arlington, VA.
1. Narrow the Field
WHAT A FINANCIAL ADVISOR DOES
Financial advisors are as varied as lawyers in specialty. Some focus on retirement planning, others specialize in divorce, and still others focus on helping clients meet short term goals. Basically, they can help you with three specific tasks:
- Give advice regarding securities, negotiate, and carry out trades.
- Supervise your investments, minimizing the day-to-day work you would do managing them yourself.
- Offer specialized advice regarding products they sell. Some are particularly knowledgeable about stocks and bonds, while others offer life insurance or annuities. Choose an advisor according to your investment strategy.
FIDUCIARY FINANCIAL ADVISORS
These financial advisors in Arlington, VA, are legally obligated to put aside personal financial gain to further your best interests. Selling you a product because it brings them a higher commission would be a violation that could result in them losing their license.
Clients who intend to leave much of their investment strategy in the hands on their financial advisor should pick a fiduciary one.
WHEN YOU DON’T NEED A FINANCIAL ADVISOR
Advice and management come with a cost. Don’t spend the money on a financial advisor if these are your goals/circumstances:
- Day-trading stocks—you can often do this online for a much smaller fee.
- Passive mutual fund investing—If you know what fund you’d like to invest in, you may be able to do this commission free online.
- Insurance policy-only—if your only intention is to get an insurance policy, you should work directly with the company.
- Balances below account minimums – if you cannot meet account balance minimums, a financial advisor may not be for you.
CONSIDER A ROBO-ADVISOR
A robo-advisor is computer technology that manages your investments for you using advanced analytic data. The advantages of a robo-advisor include their lower account balance minimums and rates. This technology may not be best for you if you’re seeking personalized advice and help with budgets.
THE NEEDS OF SMALL BUSINESS OWNERS
Financial advisors can offer a number of diverse services to small business owners. Therefore, you should be clear about the type of help you need:
- Budgeting for Year-to-Year Income discrepancies: planning so that a slow year won’t damage the business.
- Investing in infrastructure or growth: figuring out how to finance these goals would be the advisor’s role in this situation.
- Succession: A financial advisor can aid you in planning on passing the business on.
- Estate planning: how to invest so that you can give wealth to your heirs.
- Selling the business: determining value, assets, and preparing you to be in a good position to negotiate the sale.
- Buying other businesses: reviewing targets, appraising their financial circumstances, and advising appropriate financing options.
As you can see, financial advisors are diverse, so knowing what your needs are will help you narrow the field considerably.
2. Know Financial Advisor Specialties and Certifications
Financial advisors are required to be licensed by the Financial Industry Regulatory Authority (FINRA); however, their certifications can clue you into their strategies. Here are common licenses and certifications.
- Series 6 – a holder of this license may sell mutual funds, variable annuities, and insurance. This also allows them to be a representative of a company.
- Series 7 – a license that allows stockbrokers to trade, also known as the General Securities Representative Exam (GSRE).
- Series 63 – a license that works in conjunction with a series 6 or 7 license to fully license the financial advisor to work in many states. In addition to FINRA, this license is also administered by the North American Securities Administrators Association (NASAA).
- Series 65 – this license allow the holder to act as an investment advisor. Most states require this license to work with clients.
- Series 31—With this license, the holder can sell managed funds or participate in the supervision of those activities. This is a National Futures Association (NFA) exam administered by FINRA.
Certified Financial Planner (CFP) – This designation requires the person to have at least a bachelor’s degree with pertinent coursework, to have passed the CFP exam, relevant industry experience, and a demonstration and commitment to industry ethical standards.
Certified Investment Management Analyst (CIMA) – This professional designation issued by the Investments & Wealth Institute intended to recognize advanced investment consultants. The holder of this certification requires 3 years of professional experience, demonstrated ethical standards approved by the IWI’s Admission Committee, completion of the educational program at The Wharton School, University of Pennsylvania or the online Yale School of Management. Then, candidates take an exam and must commit to continuing education.
Certified Divorce Financial Analyst (CDFA) – This certification signifies training pertaining to the particular financial issues of divorce. They understand how to value assets, divide property, create and validate realistic post-divorce budgets, and advise parties of tax liabilities. Certifications requirements include three years’ experience in the financial or divorce industries, enroll in the course, pass an exam, and commit to continuing education.
Certified Private Wealth Advisors (CDWA) – These advisors are trained to manage clients with significant wealth.
These are only some of the most common certifications and professional designations. Looking for these can help you evaluate a candidate and understand more about the way they work.
3. Consider the Specialty of the Firm
Just like individual financial advisors in Arlington, VA, firms have particular fields of concentration. Make sure to do some preliminary research before giving a firm a call. An in depth look at their website can clue you into the types of clients with which they usually do business.
Common firm specialties are:
Transacting – Trading firms will focus on charging per transaction in your accounts.
Insurance – Firms that want to focus on the long term will offer insurance policies and aim to manage the bulk of your accounts. This is great for people looking to invest, plan for retirement, and manage inheritances or wills. However, if you only want help with one specific area of investment, this may not be the firm for you.
Investment Management – This kind of firm works for people who want to see returns from their accounts but don’t want to spend much time managing them themselves. Commonly, these advisors charge a fee every quarter.
Choosing a firm that specializes in what you need will help ensure that they can achieve the results you’re after.
4. Vet Your Short List
Once you’ve narrowed the field down in Arlington, VA, it’s time to research your candidates. Here are some things you will want to learn about your financial advisor:
- Education – How much education do they have? What was their focus?
- Professional Experience – How long have they held their current position? How many years’ experience do they have?
- Certifications – What advanced training does he/she have? What professional designations do they hold? CFP? Licensed broker and licensed investment advisor (Series 7, 65, 66)?
- Lifestyle – Will their lifestyle enable them to offer the help you need? Or will they be traveling too frequently to weigh in?
- Values – Do you care that they attend church or do charity work?
- Much of this information can be gathered before interviews, which brings us to the next step.
5. Interview the 3 Most Promising Candidates
Be sure to ask about their investment strategy. How hands-on are they, and is that important to you? Find out how available they are to you. Finally, ask questions that identify their core principles. You will want to choose someone whose philosophy matches your personality—are they risk averse or aggressive?
If you’re a small business owner, you will have other special considerations. They will need to have some experience helping clients with retirement benefits—this is particularly important. Are they familiar with business estate planning, and do they have experience? Can they handle the particular intricacies of an Irrevocable Life Insurance Trust (ILIT)? Do they have experience with executing succession plans?
Small businesses have considerations that have a significant impact on the lives of others. It’s well within your right and responsibility to ask for references.
6. Check out the Licenses of the Financial Advisor
There are many tools that consumers can use to find out if their potential financial advisors are licensed. FINRA offers BrokerCheck, which is a good place to start. Follow up on the information that they offer as part of your due diligence.
7. Select Your Financial Advisor
Once you’ve followed these seven steps, you’ll be that much closer to selecting your financial advisor. The final step requires that you are completely comfortable with fee structures and contract terms.
Occasionally, financial advisors have the discretion to alter their fees. If you’re transferring accounts, your new financial advisor will want to shield your funds from any unnecessary fees of transfer.
Your new advisor aids you in completing any paperwork, signing contracts, and gaining access to client programs or technology. You will need to manage expectations regarding communication during these initial stages, which require some adjustment.
KNOW THE FEES
While much of the criteria for selecting a financial advisor will depend on your current needs, these always evolve. It’s not a bad idea to think ahead here.
Furthermore, before you finalize your selection, you will want to consider your potential financial advisor’s fees alongside current typical fees. Some fees are per-transaction, others are a one-time commission, still other services require a percentage paid per quarter or annually.
Financial Advisor | Arlington VA
A financial advisor can really make all the difference in the overall success of small business owners’ financial stability and success. Similarly, individuals and families in Arlington, VA, can realize their financial goals with the aid of a financial advisor. Contact Argent Bridge Advisors to get started.