Suze Orman, personal finance celebrity, isn’t exactly a fan of financial advisors. Before concluding the final installment of her long-running television show, she told her audience that if they want to find the best financial advisor, they should just look in the mirror.
Orman has stood firmly against traditional financial services since she first started publishing her self-help books in the 1990s. And over the years, she has encouraged her followers to use common sense when it comes financial matters, like avoiding overspending and undersaving.
But why exactly does she hate financial advisors so much?
Orman often jokes that a financial broker will “make you broker.” Her biggest pet peeve with financial advisors is that most are only looking to sell products.
But even Orman admits that not all financial advisors are bad. Instead, search for some practical advice on how to find an objective financial advisor. Here’s what Suze recommends when searching for a financial planner.
Find out What the Planner’s Credentials Are
What type of credentials does a financial advisor have? Orman recommends looking for someone with the CFP (Certified Financial Planner) designation. These individuals are required to study financial planning, pass a rigorous two-day exam, and have planning work experience. Having a CFP designation is now becoming a required standard for most financial advisors.
Look For a Planner That Asks About All Areas of Your Life
An objective financial visor will look at all aspects of your life, including your relationships, health, and liabilities – rather than just asking you how much money you have. Once you have a better understanding of your life situation, they can offer a solution that is product-driven.
Always Visit the Planner’s Office
Rather than having a planner come to you, go to his or her office. This will give you a unique opportunity to see if they are neat and organized. In a financial advisor can’t even keep his or her own office organized, how can they help you keep your life in order?
Find Out How the Advisor Is Compensated
This is one of the most important tips. Orman recommends going with a financial advisor that charges an hourly or a flat rate. These are known as fee-only planners, and it’s best to look for one who is a member of the National Association of Personal Financial Advisors.
How your financial advisor is compensated says a lot about whether the advice will serve your interests, or his/her own interests. If advisors mix in product sales with their advice, there is great potential for conflict of interest and it’s difficult for the advisor to be objective.
Suze Orman warns that working with a financial advisor who earns all of his or her money through commission on the investments you buy and sell will never have your best interests in mind. These advisors will only be interested in getting you to do a lot of buying and selling.
Whether you realize it or not, many financial advisors still get hidden kickbacks” from their brokers. This means that a large portion of your commission is given to them from their broker. So, even if advisors don’t explicitly work on commissions, they may still receive these hidden kickbacks. That’s why Suze Orman recommends working with advisors who only charge an upfront, flat fee.
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