If you are an independent (i.e. single, widowed or divorced) woman, you are in control of your own finances. However, you may not feel entirely comfortable with topic of personal financial planning. You may not feel you have an aptitude for it. You may not be all that interested it. You may not have the time for it. But you know financial planning for women is important. If this describes you, you should find an advisor and this article will help you do it.
Establish Your Goals
The place to start is identify your goals and objectives. The broad areas that make up financial planning are: budgeting and cash flow management, insurance planning, education planning, tax planning, investment management, retirement and income planning and estate planning. What’s important to you? If you have priorities in more than of these areas, you should look for an advisor who practices comprehensive financial planning for women.
You should look for an advisor who is independent. Advisors who work for banks, brokerage firms, insurance companies, mutual funds, and credit unions often struggle to navigate conflicts of interest that exist inside these large financial institutions. An advisor working for an independent Registered Investment Advisor will be free to offer you unbiased financial advice.
Standards of Care
Financial advisors are held two different standards of care. The Suitability Standard of Care requires that an advisor has “a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer.” The Fiduciary Standard of Care requires that an advisor “must, at all times, serve the best interest of its client and not subordinate its client’s interest to its own. In other words, the investment adviser cannot place its own interests ahead of the interests of its client.” Working with a Fiduciary is an important aspect of financial planning for women.
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Compensation and Expenses
Financial advisors are compensated in variety of ways. They can sell products and earn commissions. They can earn hourly fees. They can earn flat fees. They can earn fees that are calculated as a percentage of the amount of assets they manage or some other metric (e.g. net worth, income). Some advisors describe themselves as “fee based” which means that they earn both commissions and fees. You may also pay fees associated with third parties, fund expenses and trading commissions. Most consumer advocates believe that paying fees that are reasonable and stated clearly in advance is preferable.
Financial planning for women is complex. You should work with someone who is well-educated. The CFP Board requires Certified Financial Planners™ to hold a bachelor’s degree from an accredited college or university. The most accomplished advisors often hold graduate degrees, such as an MBA. The more educated your advisor, the more knowledge she will bring to serve you.
There are dozens of credentials held by advisors. It is confusing. Many of them lack substance and can be obtained with minimal effort. There are, however, a few designations that are rigorous, requiring knowledge, experience and passage of one or more exams: The Certified Financial Planner™ (or CFP®) from the CFP Board, the Chartered Financial Consultant (ChFC®) from the American College of Financial Services, the Chartered Financial Analyst® (CFA®) from the CFA Institute and the Personal Financial Specialist (PFS™) from the American Institute of Certified Public Accountants (AICPA).
If you wish to work with someone who has very specific knowledge in an area of concern to you, be sure to find someone who holds a designation or certificate in that area. For example, if you are going through a divorce, consider working with a Certified Divorced Financial Analyst (CDFA). You can learn more about professional designations at FINRA’s website.
Your life has undoubtedly taught you that there is no substitute for experience. This is particularly true of investing. Investment markets go through cycles which can run from weeks to many years. These cycles are often fueled by investor sentiment. Inexperienced investors can get swept up in these emotional waves and this can lead to undesirable outcomes.
So, look for an advisor who has experience providing investment advice and guidance over many market cycles. The more experience offering financial planning for women, the better. If you decide to work with a younger advisor, just make sure she is partnered with a mentor who has served clients for several decades.
While the financial services industry is regulated, there are still many advisors in practice who have checkered backgrounds. You should make sure that your advisor has a clean record with regulatory authorities. You can check at FINRA’s BrokerCheck and the SEC’s Investment Adviser Public Disclosure website. Ask investment advisors for their Form ADV and Form CRS which are required disclosure documents.
So, far we have discussed objective criteria for the selection of a financial advisor. Once you have identified a few advisors who for whom you can “check all the boxes” for these criteria, you might consider other subjective criteria. Do you wish to work with a male or female advisor? Would you prefer an advisor who is about your age, older or younger? Is it important that your advisor is close to you geographically?
Once you have narrowed your list down to three or four advisors, you should interview them. Your relationship with your advisor should be one of the most important relationships in your life. So, make sure you trust the person, you like the person and you have rapport with the person. If your initial reaction to an otherwise well-qualified advisor does not feel right, continue your search.
Find Your Advisor
Now, where can you find advisors who practice financial planning for women? You can find “fee only” advisors at the National Association of Personal Financial Advisors, the Alliances of Comprehensive Planners and at the Garret Planning Network. You can search for a CFP® at the CPF Board.