The right financial advisor can make a big difference in helping you achieve your financial goals.
How should you go about finding the right financial advisor for you?
The Importance of a Financial Advisor
Here’s how a financial advisor can add value:
Expertise and Knowledge: Financial advisors understand the financial markets, investment strategies, and tax implications. Their expertise can help you make informed decisions that align with your financial objectives.
Personalized Guidance: A qualified financial advisor will take the time to understand your unique financial situation, goals, and risk tolerance. They will tailor a financial plan that suits your needs, whether you're saving for retirement, buying a home, or funding your child's education.
Wealth Preservation: Financial advisors can help protect your wealth by implementing strategies to mitigate risks and minimize tax liabilities.
Peace of Mind: Knowing you have a professional managing your finances can provide peace of mind and relieve the stress associated with financial planning.
Before you search for a financial advisor, define your financial goals. A clear understanding of what you want to achieve will help you find an advisor specializing in the areas that matter most to you.
Initial Steps
Write down your short-term and long-term financial goals. These could include retirement planning, home buying, paying off debt, or funding your children's education.
Determine your risk tolerance. Are you comfortable with conservative investments and lower expected returns, or are you willing to take on more risk (and experience higher volatility) for potentially higher returns?
Calculate your current net worth. Understanding your current financial situation is the first step in creating a plan to achieve your goals.
Understand Different Types of Financial Advisors
Different types of financial advisors are governed by different legal requirements, often with different fee structures.
Registered Investment Advisors (RIAs) are registered with the Securities and Exchange Commission (SEC) and are held to a fiduciary standard. This means they are legally obligated to act in your best interests and always place their interest above their own.
CFPs are professionals who have undergone extensive training and certification to provide comprehensive financial planning services. As part of their certification, a CFP® commits to act as a fiduciary.
Broker-dealers offer a broad range of financial products and may receive commissions for selling specific investment products. Their standard of care towards their clients is to act in their “best interest.” The interpretation of this standard isn’t entirely clear, but there’s broad agreement that it's not the equivalent of a fiduciary standard
Robo-advisors are automated platforms that use algorithms to manage your investments. While cost-effective, they may lack the personalized touch of a human advisor. Robo-advisors are typically registered investment advisors with a fiduciary duty to their clients.
Once you have a clear understanding of your goals and the type of advisor you need, it's time to check the qualifications and credentials of potential advisors.
Verify credentials
Verify that the advisor is properly licensed. You can check with the Financial Industry Regulatory Authority (FINRA) or the SEC.
Look for certifications like Certified Financial Planner® (CFP), Chartered Financial Analyst® (CFA), or Certified Public Accountant (CPA). These certifications demonstrate a commitment to professional excellence.
Research Local Financial Advisors
Now that you know what you're looking for in a financial advisor, it's time to start your search for advisors in the San Francisco area.
Ask for recommendations from friends, family, or colleagues who have had positive experiences with financial advisors in San Francisco.
Use online resources like the National Association of Personal Financial Advisors (NAPFA) and the Certified Financial Planner Board of Standards (CFP Board) to find advisors.
Read online reviews and testimonials to gauge the satisfaction of previous clients.
Interview Potential Advisors
Once you have a list of potential advisors, it's time to conduct interviews.
Prepare a list of questions. They should cover the advisor’s experience, investment philosophy, fees, and communication style.
Pay attention to how well the advisor listens to your concerns and whether they provide clear and concise answers.
Request references from current or former clients.
Understand Fees
Ask about the advisor's fee structure, whether they charge a percentage of assets under management (AUM), hourly, or flat fees.
Inquire about any other fees, like trading costs or administrative charges.
Assess the Advisor's Investment Approach
Determine whether your advisor recommends an “active” or “passive” approach to investing.
An active approach involves making more frequent trades and trying to outperform the market through individual stock picking or timing the market.
A passive approach involves investing in a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs) that track a particular market index.
The pros of a passive approach include lower fees and expenses and reduced risk of underperforming the market. Since passive funds aim to match the returns of the index they track, they generally have lower transaction costs than actively managed funds.
Research has shown that over the long term, most actively managed funds fail to outperform the market, making the passive approach a more reliable investment strategy for many investors.
Trust Your Instincts
Finally, trust your instincts. Your relationship with your financial advisor should be built on trust and open communication. If you have any doubts or reservations, it's okay to continue your search until you find an advisor with whom you feel comfortable.
The purpose of this content is to provide general information and does not constitute investment advice nor is it an offer or solicitation for the sale or purchase of any securities. The information represents the views of WWP at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein. In addition, there can be no guarantee that any projection, forecast or opinion in this material will be realized. Any statement nonfactual in nature constitutes only current opinion which is subject to change. Any tax and estate planning information offered by WWP is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Investment Advisory Services offered through Waypoint Wealth Partners (WWP), a Registered Investment Adviser with the U.S. Securities & Exchange Commission. Registration does not imply a certain level of skill or training.
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. For WWP Important Disclosures and Index Descriptions: waypointwp.com/index-descriptions.