How to Choose the Best Financial Adviser

Market volatility during the past year was almost twice what it was for the same period in each of the three previous years as measured by the variability index developed by the Chicago Board Options Exchange. Home values, meanwhile, are dropping, and prices for consumer goods from bread to gasoline are rising.

Now, therefore, is as good a time as any to consult a financial adviser. He or she can provide a clear road map to reach your financial goals and help set your priorities. And later, the adviser can help you keep track of your progress, as well as reassess your direction as circumstances change in your life.

But trusting a stranger with your personal finances can be a leap of faith. It's wise then to do your homework when choosing an adviser.

Know what you want

The choice of planner will depend largely on whether you want someone to help develop a fully integrated plan for your financial future, or if you're just looking for advice on a specific topic, such as the best way to diversify your portfolio. Also consider whether you want to develop a long-term relationship, or if you just need some one-time information. Knowing ahead of time what type of services you desire will help narrow your choices.

Make a short list

Begin by asking friends and colleagues for references. When asking for recommendations, however, don't just ask for the names of ethical advisers your friends might know. Ask them about the type of relationship they have with their planner and what their needs were as a client, i.e., retirement help, estate planning, investment advice. Ask if they were happy with the amount of contact they had with their planner, as well as how much of their financial plan the adviser addressed.