How can I find a certified financial planner (CFP) who is not associated with a brokerage house? I want truly independent advice and not steered toward selling me securities. I especially want tax advice. Everyone I have called turned out to be associated with a brokerage house.
-Anonymous
This question shows that you’re definitely on the right track toward finding a financial advisor who will put your needs first.
There’s no surefire way of finding the right fit, but there are a few important filters you can use to increase your odds. (Looking for financial advice? This tool can help match you with potential advisors.)
Why the CFP Certification Matters
Looking for a certified financial planner (CFP) professional is a fantastic starting point.
Obtaining the CFP certification is a rigorous process that requires you to complete comprehensive financial planning coursework, pass a challenging exam, obtain several years’ worth of experience, adhere to a strict code of ethics and keep up with continuing education requirements.
Not all CFP professionals are independent, and some sell securities and other financial products. But no matter what, they have a significant amount of education and experience that can help them provide better advice. (Looking for financial advice? This tool can help match you with potential advisors.)
Pay Attention to Compensation
One of the surest signs of a financial advisor’s independence is his or her compensation model.
To be clear, there is no perfect compensation model that completely removes all conflicts of interest. Every model has some inherent biases that could affect an advisor’s recommendations.
But there are certain compensation models that are designed to minimize those conflicts of interest and more closely align an advisor’s pay with his or her clients’ goals. Let’s break it down.
Commission-Based Financial Advisors
Commission-based financial advisors are paid to sell financial products. That is, whenever you buy an investment or insurance product that commission-based advisors have recommended, they receive a percentage of that purchase in the form of a commission from the financial company that sells that product.
And while there are plenty of good commission-based financial advisors, this does incentivize them to recommend products that pay a bigger commission. And it may align their financial interests with the companies selling those products, rather than with their clients.
Some commission-based advisors are affiliated with a brokerage or insurance company and recommend those products exclusively or almost exclusively. Other commission-based advisors are independent, meaning they can recommend products from any financial company. Either way, they are paid to sell. (Looking for financial advice? This tool can help match you with potential advisors.)
Fee-Only Financial Advisors
Fee-only financial advisors do not receive any commissions. Instead, they are paid directly by their clients. This payment typically occurs in the form of flat fees, hourly fees or a percentage of assets under management.
There can be conflicts of interest in these arrangements. For example, hourly fees can incentivize advisors to work longer, not smarter. Assets under management fees can incentivize recommendations to build investment accounts at the expense of other goals. There is no perfect compensation model.
But the fee-only model was designed to minimize conflicts of interest by ensuring that advisors are paid by their clients, not the financial companies, and by aligning that payment with clients’ goals as closely as possible.
On top of that, almost all fee-only financial advisors are independent, which means they can recommend anything they feel will serve your goals.
Fee-Based Financial Advisors
Fee-based financial advisors are a mix of the two models above. Some of their compensation comes directly from their clients, and some of it comes in the form of commissions.
The balance between client fees and commissions can vary widely between advisors here, so you’ll have to do your due diligence. Additionally, some fee-based advisors are independent and some are affiliated with a brokerage or insurance company.
How to Find an Independent Fee-Only Financial Advisor
If you’re looking for independent financial advice, your best bet is probably a fee-only CFP professional. There are no guarantees, but this route means you’re getting someone with education and experience, and who is doing their best to align their pay with your interests.
Here are a few different places you can find a fee-only planner:
- NAPFA. The National Association of Personal Financial Advisors is a network of fee-only fiduciary financial advisors. The search tool allows you to search by expertise, as well as fee structure and life stage.
- Garrett Planning Network – This is a network of fee-only financial planners who offer hourly planning services, though some offer other fee arrangements as well. Members are required to obtain either their CFP certification or a combination of a certified public accountant (CPA) and personal financial specialist (PFS) credential within five years of opening their business.
- XY Planning Network – This network was created specifically to serve younger clients (Gen X and Gen Y). Every advisor is fee-only and offers virtual services. Every advisor in their search tool is a CFP professional.
- Alliance of Comprehensive Planners – The ACP is a fee-only network of financial advisors, with a specific focus on tax planning (which may be just what you’re looking for). Not all advisors are CFP professionals, but their designations are clear in the search results, so you can easily filter for yourself.
Next Steps
Credentials and compensation matter. Starting your financial advisor search by looking for a fee-only CFP professional is a great way to filter out a lot of people who may not be as experienced or independent as you’d like.
Just remember to focus on the “you” part of this search as well. Look for someone who listens to you, can clearly articulate your goals and values back to you, and has experience working with people like you and in your situation.
Tips for Finding a Financial Advisor
- Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Consider a few advisors before settling on one. It’s important to make sure you find someone you trust to manage your money. As your consider your options, these are the questions you should ask an advisor to ensure you make the right choice.
Matt Becker, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Matt is not a participant in the SmartAdvisor Match platform, and he has been compensated for this article.
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