Choosing a Financial Advisor in Huntsville: The 5 Key Questions to Ask

Deciding to pursue help with your finances can be daunting. There are many types of advisors in the Huntsville area, some who will advocate for you, others that will simply sell you products. Its hard to cut through the noise and narrow down the choices. To help you in the process, we’ve outlined 5 key areas to consider before you choose (or reconsider) a financial advisor. You can also use these as questions when you are meeting with financial professionals to fully understand their practice and whether it is a fit for you.

1) Is the financial advisor and their firm a fiduciary? THIS IS THE MOST IMPORTANT CONSIDERATION.

Fiduciaries are required by law to act in your best interest. Many advisors and investment firms provide planning and advice, but they are really compensated to sell investment or insurance products. These firms are not fiduciaries, they are primarily sales organizations. Thus their “advice” must end with you purchasing their product in order for the “advisor” to get paid. Choosing a fee-only fiduciary means that your advisor is compensated only by fees you pay directly, and never based on selling specific products. This ensures that your advisor is free to provide the best advice, regardless of the outcome. Further, some firms, particularly large broker-dealers, blend models. In some situations, advisors are selling financial products and in others advisors are acting as fiduciaries. Don’t settle, find an advisor that works in your best interest, as a fiduciary, 100% of the time. For more on the types of advisors, see our post here.

2) Does the financial advisor have professional investment and financial planning credentials?

You may be surprised to learn that securities licenses generally only require a high-school diploma and an exam. Further, the plethora of “letters” behind names on email signatures make it hard to distinguish between professionals. You should look for CFP (Certified Financial Planner) and CFA (Chartered Financial Analyst) designations. The CFP designation is considered indicative of a well-rounded personal financial advisor with education in insurance, planning, estate planning, investments and other areas. CFAs are investment professionals. The CFA exam is generally considered the most rigorous examination for investment professionals and CFAs are often found at wealth management and large asset management firms. Also, CFPs and CFAs tend to be fiduciaries, but not always, so remember to verify. Other types of designations are generally focused on specific areas like insurance or retirement planning and are less comprehensive. Additionally, look for professional degrees in business, law or tax which will provide additional expertise in those areas.

3) Does the financial advisor have experience working with clients in a variety of situations?

The strategic discussions you have with your advisor in during difficult personal and economic times are often where advisors provide the most value. Does your advisor have the experience to convince you to take a difficult course of action. Do you trust their advice? Seasoned professional have experience walking with clients through a variety of personal and economic situations and their experience will pay dividends (literally) when times are tough.

4) Can the financial advisor help you understand “why”?

Advisors who are making well thought out recommendations based on experience will be able to help you understand their investment and planning strategy. Understanding the plan will build your own confidence, enabling you to be disciplined and successful long-term. If the advisor cannot articulate the “why” behind the strategy, look elsewhere. Be weary of advisors who simply “implement what the home-office expert recommendation.” How does the advisor know if the firm’s view is right for you? How do they know when to tailor or customize a strategy if they are blindly implementing a centralized plan?

5) Does the financial advisor have a history of regulatory enforcement actions for violating regulations or mistreating clients?

You would be surprised at the number of “bad apples” who are still allowed to practice, even in Huntsvile. You can go to FINRAs Broker Check (brokercheck.finra.org) and search for an advisor by name to verify their history. Most reputable advisors have no enforcement history on their FINRA record, so ask detailed questions if anything exists.

There are many other items you can consider, from digital experience to personal comfort level. Regardless of other factors, when you find an advisor that can answer questions in each of these areas to your satisfaction, you likely have an advisor that will provide unbiased, high-quality advice. We believe our firm will stand up well to these questions, but we encourage you to ask us as you consider a financial partner in Huntsville.