Find the Right Financial Professional for You

5 minute read

The financial advice industry is enormous. In 2021, there were over 1.3 million financial professionals in the U.S. according to the U.S. Bureau of Labor Statistics. So, it’s not surprising if you feel a little lost when it comes time to find and select a financial professional for your exact needs.

Advice for all?

One of the biggest misnomers about financial advice is that it is typically only for the wealthy. Whether it’s simply getting a clearer understanding of your finances, best ways to save and/or invest for retirement, creating a specific retirement income plan, or managing your complete retirement portfolio, there’s a financial professional out there for you. Most important is finding the right financial professional for your exact needs.

When you are younger, say in your 20s, you might seek advice on ways to save for your first house or strategize on ways to pay off your student loans, budget properly and still save a little for retirement. When you reach your 30s and beyond, your needs could be to fund your children’s college education or build your retirement nest egg. No matter what, choosing an experienced financial professional who provides fresh perspectives and looks at your total financial life (aka “holistically”) is key. Founder of Wealthramp, Pam Kruger, puts it this way: “How can a financial professional answer questions about your investments if they don’t know that you’re possibly going to be buying a second home soon?”

WATCH Your Money Map: Finding the right financial professional for you

The cost of advice

The fact is that financial planning today has become far more complex than it used to be generations ago given the dizzying selection of savings/investment choices, complicated tax and other regulatory requirements, making decisions about when to start Social Security and/or the type of Medicare plan to select when the time comes. So, when you decide you need to hire a financial professional, your next question is likely, “What will this cost me?” Historically, total fees were often difficult to assess.

For example, while you may have seen the upfront commission you paid on a certain investment, you may have forgotten about the ongoing internal fees disclosed in a prospectus. Today, many financial professionals offer their clients pricing based on the client’s total account value and refer to themselves as “fee only” advisors. An example – if your account(s) are worth $500K and your financial professional charges 1%, you pay $5K a year for the advice you receive. If your account increases in value to $600K, obviously that 1% fee also increases ($6K). The same is true if your account value decreases. If it went down to $400K, the fee you pay also decreases ($4K).

Alternatives to this design include financial professionals who charge by the hour, a flat fee, a commission, or a combination of these. In many cases, the simpler the service (e.g., a onetime financial plan) might mean a flat fee makes the most sense. Wealthramp is one of the helpful places to start your search. The Financial Industry Regulatory Authority (FINRA) also provides information about the background and experience of financial professionals, and the Alliance has references to other websites that can help you find the right financial professional.

Price is an issue in the absence of value

Financial professionals will often say their real value is how they help you avoid costly mistakes when you’re tempted to act on your emotions- fear or greed. As Pam Krueger says, “99% of what a holistic advisor offers is behavioral help, 1% is math.” Current volatile markets and high inflation are when a strong financial professional can help you create and stick to a plan. If you are nearing or in retirement, they can help you determine if you are on track to meeting your retirement income needs. If they are insurance licensed, they can also work with you to discuss if your longevity risks can be offset by purchasing an annuity.

Knowing you have reliable sources of protected income – lifetime income you’re guaranteed to receive – can be a great way to plan, help manage your budget, and sleep well at night. There are only three sources of protected income for retirement – Social Security, pensions, and annuities. Since fewer and fewer people have pensions these days, a protected income source that can help fill this gap in guaranteed income is an annuity.

For the latest ideas, simple tools, and inspiring stories to help you navigate your next chapter in life, head to protectedincome.org.

Ten questions to ask a financial professional:

1. How are you compensated?
2. What is your business model?
3. How do you prefer to communicate with your clients?
4. What do you expect from your clients?
5. What made you decide to become a financial professional?
6. What type of investment products do you use to build diversified portfolios for your clients?
7. How much emphasis do you put on retirement income planning?
8. What is your minimum account size for new clients?
9. Do you have a network of other professionals (such as CPAs, attorneys or product specialists) that you have access to if needed for special circumstances?
10. What’s the biggest lesson you learned in your first three years of business?

Background on Guest
Pam is the Executive Producer and Co-Host of the MoneyTrack series on PBS television. During her 20+ year career in finance, Pam has earned recognition and admiration as both an investor advocate and educator. Early on, Pam realized that many consumers lacked a basic understanding of financial planning and how financial advisors make their money — and why that matters. This sparked Pam’s commitment to help as many people as possible improve their financial literacy and build confidence. Wealthramp embodies her commitment to investors everywhere.

Visit protectedincome.org to find more resources and guides, and Pam’s website, Wealthramp, to get matched to the right financial professional for you.