Finding a Financial Professional You Can Trust

Why It Matters:

  • If you're thinking of hiring a financial professional to guide your financial life, how can you find one you can trust?
  • Trust is important in a financial relationship. How do financial professionals earn yours?
  • Beyond credentials, there are a few things you can look for.

Chase Squires tkc.profilePicture Written by: Chase Squires | Transamerica
March 06, 2018

5 Min readClock Icon

If you’re thinking of turning over your finances to a financial professional, there’s got to be trust.

You worked hard for your money. It represents hopes, dreams, the things you want to do in retirement, and the people you want to take care of. And earning your trust may be even harder lately, with big banks accused of opening millions of fraudulent accounts or overbilling investors.

About half of investors say they feel overwhelmed by the available investment choices, and 61% wish they had reliable guidance, according to the 2017 Scottrade Retirement Study. Yet a Harris Poll commissioned by online wealth management company Personal Capital reported nearly a third of Americans believe a financial professional is likely to take advantage of them, and financial scandals have left 70% of Americans questioning the trustworthiness of financial professionals.

Personal Capital added, “It’s no surprise that Americans are beginning to have their doubts about whom they can really trust with their finances.”

Here are some signals that could help you decide if a particular financial professional is right for you.

Listening

Do you worry financial professionals may plow ahead with their own agenda and ideas because they may have more knowledge of the financial world than you?

You deserve to work with a financial professional who hears you and understands your financial goals. Well known financial professional and frequent speaker Michael Kitces acknowledges that investors like to know they are heard and understood by those in the financial services industry.

Bottom line, it’s OK to ask your financial professional to really listen to what you want and how you feel and what you do or don’t understand.

Websites matter

Investors today have more access than ever to research a financial professional or firm before signing on. Look around, read, and see what’s there. A former financial services executive now providing marketing services for financial professionals at Paladin Digital Marking, Jack Waymire, says some firms are lagging.

Waymire says many investors are looking for financial professionals who avoid high pressure sales and offer fee transparency, education, experience, and have professional designations. If you don’t see the information you want online, you have the power to move on and keep looking.

Communicate on your terms

You should feel comfortable with your financial professional. If you’re not looking for your father’s (or grandfather’s) type of service, you’re not alone. And the financial services industry is noticing.

Thomas Holly, U.S. Asset and Wealth Management leader at PwC, says $30 trillion (50% of all U.S. investable assets) will change hands from Baby Boomers to Gen X and Millennials over the next several years, and he’s advising financial professionals to move beyond the one-on-one office visit to digital platforms their new clients use.

That means it’s not unheard of to want a financial professional who offers video conferencing, a team approach that can provide answers on demand, and a presence on social media. You can look for communication on your terms, not theirs. (If you still like a one-on-one office meeting, that’s OK, too.)

Birds of a feather

Ever feel like someone “gets” you? You just feel comfortable together?

Science says that’s a thing. When it comes to financial advice, it turns out people trust people who are like them. Trust and “social proximity” are the topics of a study by German academic researchers Oscar Anselm Stolper and Andreas Walter. The research is titled “ Birds of a Feather: The Impact of Social Proximity on the Propensity to Follow Financial Advice.”

Relying on 2,400 interviews, the two found people trust others of similar age, gender, and social status as themselves. The researchers wrote, “We find that the intensity of social ties with the advisor is strongly positively associated with customers’ likelihood of following financial advice.”

Turns out, choosing the financial pro who’s right for you comes down, at least in part, to finding someone who may be more like you.

Designations

There are plenty of financial designations out there. Some take years to earn and represent a deep knowledge of finance. Others, maybe not so much. Having a financial designation does appear to signal trustworthiness. In a research paper produced for the American College of Financial Services, Jeffrey Camarda reported a correlation.

“Can consumers expect less misconduct from advisors who hold at least any one of the CFP®, ChFC®, or CFA® designations? After controlling for other factors, this study has found that the answer is yes,” Carmada wrote. “High-level financial planning/wealth management is probably as complicated a field as medicine or law, but the education and testing barriers for securities sales licenses and even for financial planning designations, in many ways fall short of this complexity.”

Carmada suggests that under something known as “signal theory,” a designation may serve as a “quality signal,” something an investor may take as a proxy for quality. But should it? Dig deeper: What do those letters after a financial professional’s name mean?

The Financial Industry Regulatory Authority (commonly known as FINRA, the organization that polices many in the financial services industry) maintains a database of designations and acronyms. You can look them up for a better idea of what they actually mean.

Check them out

There’s an old saying in journalism, “If your mother says she loves you, check it out.” In other words, trust, but verify. If you’re considering hiring a financial professional, you can go to FINRA’s website, FINRA.org. On the landing page you’ll find BrokerCheck. You can enter the financial professional’s name and verify registration and see if there are any past complaints. It’s free.

A financial professional can be a helpful guide on your journey toward retirement. But for you to accept advice, there has to be trust. Ask questions, look for someone who makes you feel comfortable, and check them out thoroughly.

Things to Consider:

  • You be you. It's OK to have questions, to want to be heard, and to ask for communication on your terms. The industry recognizes you want trustworthy service on your terms.
  • You don't have to take your uncle's or your best friend's word for it when choosing a financial professional. The internet makes it possible to research financial pros all around you. And if you feel more comfortable with someone who shares traits with you, science says that's normal.
  • Check up on your financial professional: BrokerCheck at FINRA.org has free information on individuals and firms licensed to sell securities.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™, and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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