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  • CFO Magazine

The Best Advice

Choosing a financial adviser may be the biggest investment decision you make.

You wouldn’t hire the next guy who walks in your office and can talk business to be your company treasurer. If you did, you might wind up with a delivery boy instead of an executive.

Likewise, you almost certainly didn’t get your job without competition, a rigorous screening process, and probing interviews. After all, the future of your company’s finances were at stake.

So why would you use lower standards when hiring a financial adviser for you and your family? Choosing an adviser may be the biggest investment decision most people make — and CFOs are no exception, no matter how sophisticated they may be about corporate finance. An adviser affects a lifetime of choices across the entire spectrum of personal finance. Ideally, the hiring process for a planner should be almost as rigorous as the one you went through to get your job.

Unfortunately, most people who hire advisers — whether couples earning a median income or top-level executives with millions in assets — interview just one candidate. They take little time to check his abilities and credentials. Indeed, they may hire someone via a casual referral, or a chance meeting at a cocktail party.

That, of course, is a recipe for disaster. High-ranking executives must be particularly careful in the hiring process — not because they are rich, but because they may be subject to standards that don’t pertain to the common investor. For example, an executive who has incentive stock options is not the usual client for the average financial planner. Typically, an adviser might suggest exercising options in January so they can be disqualified in December, but a CFO may not be allowed to disqualify the options.

Even basic diversification can be a problem. High-ranking corporate executives may have a high percentage of their net worth tied up in company stock, and traditional financial-planning tools and formulas don’t always work in this situation. It’s critical, therefore, that a potential adviser have experience with clients in similar financial circumstances. You don’t want to be the guinea pig for an ambitious adviser hoping to someday have a better class of clientele.

How can you find a qualified, trustworthy financial adviser who will provide mistake-free service? Here’s a checklist to get you started.

Ask around for references — but be skeptical. The best way to search for candidates is to request references from people you know and whose needs are similar to yours. Don’t be too trusting, though: their selection process may not have been rigorous, and they may have chosen the first adviser they interviewed.

To find adviser candidates who will be free of the bias of your friends, try contacting the following agencies:

The Financial Planning Association offers referrals to advisers in your area. Use the “public” area at www.fpanet.org.

The Certified Financial Planner Board of Standards can provide a list of advisers in your area who have earned its credential, one that indicates that an adviser has an outstanding overall grounding in financial issues. Use the search function at www.cfp-board.org.


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