If your finances have become too complicated for you to handle due to a major event (inheritance, approaching retirement) or you have complex financial needs (trusts, incorporations), a good financial advisor can save you money and stress . After determining the need for the assistance of a financial advisor your must decide if you require a financial planner, investment advisor, insurance agent, an accountant or a combination of these to help you manage your plans for the future. Once you know who you need you need to know how to find them. In addition it is helpful to understand how these advisors are paid and how to evaluate their performance.

Different Types of Advisors
In order to get the right help for you, look for a professional who specializes in the areas where you need help.

Financial planners offer full-spectrum planning assistance, including retirement planning, tax guidance, and insurance assessment, although most tend to specialize in one of these areas. Many have earned the professional designations of CERTIFIED FINANCIAL PLANNER™ (CFP), Chartered Financial Consultant (CFC), or Personal Financial Specialist (PFS, a designation offered only to Certified Public Accountants, or CPAs).

Investment advisors provide expertise on securities only. In order to call themselves “investment advisors” they must register with the Securities and Exchange Commission or their state securities commission, depending on how much money they manage. Their credentials are generally either an Investment Advisor (IA) or Registered Investment Advisor (RIA).

Insurance agents give advice about and sell insurance policies. They must be licensed by their state, and many also hold the Chartered Life Underwriter (CLU) credential.

Accountants advise on tax planning, and many have also earned the Certified Public Accountant (CPA) designation.

How They’re Paid
An advisor’s payment schedule gives a clue as to how objective that professional’s advice will be. The three primary pay structures are:

Fee only. Fee-only advisors get a flat fee for their advice—either a percentage of the total amount they’re managing on your behalf (typically 1 or 2%), an hourly fee, or an annual fee. They do not earn any commissions when they recommend you buy a product, such as a mutual fund, stock, or annuity.

Fee based. These advisors are compensated in two ways—a flat fee for their advice plus a commission from selling products. Most of their income is derived from fees, however.

Commission based. Commission-based advisors make money only from commissions on products they sell you.

How to Find a Good One
If you decide you could benefit from a financial advisor’s expertise, here are the best ways to find the cream of the crop:

Referrals. Friends, family, and colleagues with similar financial situations and goals to you are a good source of referrals. If you already work with a CPA or attorney, he or she can likely recommend a good financial advisor too.

Homework. Ask for an initial consultation with the advisor to ask questions, hear more about his or her credentials and approach, and find out how they are compensated.

The right fee structure. To minimize conflicts of interest, stick with a fee-based advisor. Because they don’t earn money for each transaction (as a commission-based broker does), they are the most likely to put your best interests first, not theirs.

A written understanding. Ask your advisor for a written investment policy statement that outlines your risk tolerance, target return, asset allocation necessary to get you there, and timeline.

Warning Signs
Here are some common phrases you should take as clues that a financial advisor is not your best choice: “I get paid every time you buy or sell.” A professional who gets paid every time you buy or sell has more incentive to suggest unnecessary transactions than to manage your money for long-term growth.

“I can beat the market.” While this may sound appealing, no advisor can consistently outperform the market. You want a professional who can steer you over the long-term toward your goals, not one who chases returns.

“Let me do the thinking.” A good advisor educates you about your choices, offers objective advice, and works with you to make decisions as a team. Avoid those who keep their methods a secret and don’t solicit your feedback.

“I’ve got a no-fail, risk-free system.” Although a well-managed portfolio can minimize your vulnerability to a volatile market, there is no such thing as risk-free investing.

“I can take care of all your financial needs.” No advisor can realistically be an expert in every single aspect of financial planning. A good advisor will be able to refer you to the best experts to meet your particular needs, and will work with your other advisors to make sure all aspects of your plan are in sync.

THE BOTTOM LINE

A good financial advisor can help your portfolio grow and ensure that you meet your most important financial goals. But because your portfolio is such an important piece of your financial security, you can’t entrust it to just anyone. Do your research before committing to an advisor.