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Who Can You Trust?

Originally submitted Online: June 17,2009

A Delaware Voice Submission

Vincent A. Schiavi, CFP©, CPA/PFS

The financial challenges confronting most individuals today are monumental. Those of us who have the aptitude and the energy to solve our financial riddles are far outnumbered by the masses with neither the ability nor the desire to combat threats to their financial security.

Before the Great Recession, many dismissed the need for professional financial planning. Today, more people are willing to admit that achieving financial security is going to take more effort and a greater investment of their time and resources.

Suppose you are in the majority and decide that you should at least consider seeking professional assistance. Where do you turn for financial guidance? Where would you even start? Let's look at the options. You can seek the advice of family and friends, which is the most frequently used source of financial guidance. However, unless your family and friends include individuals of exceptional training in taxation, investments, retirement planning, debt management, insurance planning, education funding, or estate planning, the answers you receive can hardly be expected to be worth more than what you paid. Follow the advice from family and friends at your own risk.

What about all those talking heads on TV with their great deliveries and knowledge of all kinds of information, some useful, some dangerous? Unfortunately, their objective is to entertain, and not to customize recommendations that fit your unique financial profile and needs. Their success is measured in ratings and sponsors, not in accountable financial guidance.

Let's consider the professionals that often hold themselves out as financial advisors. This universe includes, but is certainly not limited to, security brokers, insurance agents, bankers, accountants, financial planners, investment advisors, wealth managers, and private bankers.

What do you think is important in narrowing down the list of potential advisors for you? Do you want someone who has a lot of expertise in one area, but limited or no useful knowledge in others? If not, that eliminates most brokers, accountants, insurance agents, pure investment advisors, etc., you get the idea.

Well, you say, I can use a team of advisors to put together all of the guidance I need to achieve financial security - good luck. Using such an approach, often leads to loose ends and disagreement, as to where one advisor's responsibility ends and another starts. At its worst, such an approach can lead to each "advisor" taking their fee and passing the client around the table.

We would argue that the best approach is to have one advisor coordinate the talents of various professional specialists to achieve a seamless approach to financial security.

Who should be that coordinator of financial planning services? There are no text book sure fire ways to screen the field. However, it is our opinion that you can increase your odds of success by looking for an individual or firm that:

  • Devotes a considerable amount of time and service to financial planning, and not to just one area of personal finance, such as investment management, tax planning, estate planning, insurance, or banking.
  • Has considerable experience. While today's challenges are particularly severe, we don't think it's ever a good time to trust your future to someone who is learning financial planning at your expense. It's better to have the aspiring advisor work with a mentor for several years instead.
  • Has a compensation structure not tied to the sale of products. Would you want to be the customer that qualifies your "advisor" for a trip to Hawaii as a result of hitting a sales target? We didn't think so.
  • Charges reasonable fees. If you are being charged 2% of investments a year for advice, you are decreasing your chances for a reasonable return once fees and taxes are considered. Understand that high fees and expenses often lead investment management to take greater risks in an attempt to produce attractive net of expense returns.
  • Has strong ties to the local community. Be wary of long distance advisors or advisors that fail to establish strong local roots. An advisor with family and friends in the area is far less likely to be untrustworthy. After all, doesn't it seem like everyone in this state can be connected using only two degrees of separation?
  • Has exhibited a desire to be educated in the field of financial planning through appropriate credentialing, and who maintains a formal commitment to continuing education and regulatory compliance.
  • Accepts a fiduciary responsibility to act in your best interest at all times and, as an independent advisor, does not have a legal obligation to act as an agent for their employer. 

These are significant hurdles for most professionals wishing to remain or become your coordinating financial advisor, and justifiably so. We have all seen the financial devastation and despair that can occur with inappropriate or nonexistent financial guidance. This is no time for accepting anything less than a full commitment to serving your needs. Your family's financial security depends on it.

To start your search, consider:

The Financial Planning Association


The National Association of Personal Financial Advisors www.napfa.org