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I am looking for a financial advisor. Who would you recommend, if any one firm? I would like to purchase a home and I am going to be receiving an inheritance, so I would like to find someone very soon.
Nancy S. -- Canadensis, PA

This is a lot like finding a doctor. Just because they work for a good firm, went to a name school, have the right certificates on the wall, doesn’t mean they’re right for you. One of the most important factors is chemistry: you’ve got to like the person and – most importantly – trust them.

Most people find a new advisor by word of mouth from a friend or relative. If that’s not possible, give a few firms a call. Big firms may offer wider selection of services, smaller firms may give you more personal attention. Either way, arrange to meet with at least three different advisors before choosing one. Ask them any and all questions you may have – no matter how “dumb” those questions may seem to you. You’ll learn a lot about the person – before you hire them – by the answers you get. If all you get is a lot of jargon or, worse, “you don’t need to worry about that,” thank them for their time and go on to the next one.

At these first meetings, ask for specific advice and then compare what several advisors say. There’s nothing like getting multiple opinions – for free – before you get started. And these get-to-know-you sessions are absolutely free. Make sure you ask about fees with the first call. If you say you’re looking for a financial advisor, and someone tries to charge you for the first meeting, cross them off the list.

Make sure you take the time to understand how you’ll be charged for the advisors services. What you’re trying to avoid is a broker posing as a “financial advisor”  -- which is what most brokers pout on their business cards these days. Brokers gets paid a commission on the investments they sell you, so they have an incentive to steer to funds or stocks that make money for them – regardless of whether they make money for you. You’re looking for either a “fee based” advisor (who charges an hourly fee for occasional meetings) or an advisory account where you’re charged a percentage of the balance – regardless of where it's invested.

With a fee based on the size of the account, the advisor makes more if your assets grow, so your interests are better aligned. You may be surprised to see how much fees vary, but you don’t necessarily want to go with the low bidder. Expect to pay 1 to 1.5 percent for an advisory account – less if you're investing in mutual funds. Expect to pay lower fees if your money is mostly in bonds, a little higher if it’s in stocks, which takes more time to actively manage. But by all means ask about any and all fees for the investments you're asked to consider. And don't hesitate to try to negotiate a lower fee: not everyone pays sticker price.

Avoid rushing the process: it can take time to feel comfortable with an advisor. You can get some initial advice, say, about buying a house from your interviews with potential candidates. But you don’t have to rush your inheritance into a set of investments right away. In fact, you may change your mind a number of times as you get used to your new financial life. That’s not a bad thing.

Until then, you can keep your money in a safe, liquid investment like a money market fund or in short term bonds. If you open a "temporary" account with one of the big firms, make sure you won't owe any fees when you close it. And expect to get the hard sell to sign up for more products -- like credit cards or second mortgages. If you don't like the way you're being treated, pick up and leave. People open and close investment accounts all the time.

If you haven’t handled investment decisions before, it may take a while to find out just how comfortable you are with risk: that’s to be expected. As you get started, you may want to put only a piece of your money into riskier investment likes stocks. That’s a lot better than jumping in too quickly to a level of risk you’re not comfortable with.

So take your time, find someone you trust (and like) and you’ll soon be on your way.

 

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