Your Financial Advisor Should Have These 3 Skills and Characteristics

January 16, 2023

You've finally decided to get help putting your financial house in order. Perhaps you were lucky and experienced a financial windfall. Other triggers for this decision are more likely.

If you are starting a family, you might want to understand how to fund the cost of raising and educating children.

Buying or selling a home involves many financial issues like down payments, mortgage rates, and the best use of the proceeds from a sale.

Often, major life events, like the death of a spouse, divorce, or remarriage, present complex financial issues that need to be addressed. These can include cash flow, division of assets, estate planning, and a review of insurance policies.

One of the most common reasons for retaining a financial advisor is to plan for retirement. While a critical concern is how to ensure you won't run out of money, you may also need to decide when to claim your Social Security benefits, how to fund future medical costs, how to invest your retirement assets, and how to withdraw funds in a prudent and tax-efficient manner.

Before you embark on the journey, here are some suggestions to help you find the best financial advisor.

3 financial advisor skills and characteristics you should look for

1. Basic due diligence

Start your due diligence by going to the website of the U.S. Securities and Exchange Commission (SEC) and searching for the financial advisor's background.

Enter their name in the Investment Adviser Public Disclosure website database. Confirm their registration status. According to the SEC, it's a red flag if they're not registered.

If they are, scroll through their ADV and pay particular attention to item #5, "Information about their advisory business," and item 11, "Disclosure information."

Their ADV will tell you how many clients they have, the number of assets under management, and whether they have been the subject of disciplinary proceedings or customer complaints.

This helpful website from the SEC's Office of Investor Education and Advocacy provides information that will help you check out brokers and investment advisors.

2. Consider a registered investment advisor

The distinction between the duty of care owed to a client by a registered investment advisor (RIA) and a broker is critical.

An RIA has a fiduciary duty to always place your interests above theirs. They are required to disclose all material facts before you make an investment decision and avoid conflicts of interest, including those that can't be avoided, while providing accurate and thorough information.

Brokers have a lower duty of care. They are not required to be fiduciaries. They only have to provide "suitable" recommendations.  

The rules governing disclosure of conflicts of interest are less strict for brokers than for RIAs. While an RIA is legally required to be loyal to the client and act in good faith, brokers may be loyal to the broker-dealer who employs them and not necessarily to the client.

You will entrust your financial advisor to make recommendations with far-reaching ramifications for you and your loved ones. You deserve someone whose loyalty is not conflicted.

3. Qualifications count

It's surprisingly easy to qualify as a financial advisor or financial planner. There are no formal educational requirements. You don't even have to graduate from high school. All that is needed is a passing grade on a 3-hour examination, and you are ready to start dispensing financial advice.

Another little-known fact is that those with these minimum requirements may charge the same fees as those with far more impressive qualifications.

Here are the qualifications held by the principles of Vistica Wealth, together with an explanation of what they mean:

Jeff Vistica, CFP®, ChFC®, ChSNC®, and AIF®

  • CFP® certification

To obtain the Certified Financial Planner® (CFP®) certification, applicants must complete coursework through a CFP Board Registered Program and hold a bachelor's degree or higher from an accredited college or university. It takes an average of 12–18 months to complete the coursework.

You must then pass an exam that consists of two 3-hour sessions over one day.

You are required to complete either 6,000 hours of professional experience related to the financial process or 4,000 hours of apprenticeship experience that meets additional requirements.

Finally, you must agree to adhere to high ethical and professional standards for the practice of financial planning and act as a fiduciary when providing financial advice, always putting the client's interest first.

  • ChFC® designation

The Chartered Financial Consultant (ChFC®) is a designation that allows the professional to provide financial advice from estate planning to corporate benefits.

Individuals who are considered for this designation must already have a finance or business-related degree and should have done the work in the field. Moreover, being a ChFC® requires continuous learning and real-life application of what they have learned.

  • ChSNC® designation

The Chartered Special Needs Consultant® (ChSNC®) designation is for advisors who want to impact the lives of people with disabilities or special needs.

Advisors must complete three courses, agree to abide by a code of ethics, and have either 5 years of professional experience in financial services or 4 years of relevant experience and a degree from an accredited institution. There are also continuing education requirements.

  • AIF® designation

The Accredited Investment Fiduciary® (AIF®) designation is a professional certification demonstrating that an advisor or other person serving as an investment fiduciary has met certain requirements to earn and maintain the credential.

To obtain this designation, you must complete training, pass an examination, meet experience requirements, and satisfy the Code of Ethics and Conduct Standards.

Dan Vistica, CPA (retired), Master of Science in Taxation

  • Certified Public Accountant

Requirements to become a CPA vary by state. All 50 states require a bachelor's degree with at least 150 credit hours of coursework. Most states require candidates to take an ethics exam.

All candidates must pass the Uniform CPA Examination®, which consists of 4 sections. The CPA examination has a well-deserved reputation for being difficult. The national pass rate is around 50%.

In line with this, CPAs can put their license in retired status. What does this mean? CPAs can choose this option if they don’t want to practice public accountancy anymore and perform their tasks or duties for a private entity like a business.

  • Master of Science in Taxation

The Master of Science in Taxation allows undergraduate degree holders to pursue a specialization in taxation. Beyond the requirements and process related to taxation, pursuing this graduate degree provides a deeper look into the system of taxation and examines it as a concept and in theory.

Hire a financial advisor with these skills and characteristics

Once you've done your due diligence, find an advisor who has a fiduciary obligation to you, holds meaningful qualifications, and is equipped with the necessary financial advisor skills and characteristics, you should be well on your way to a positive, long-term relationship. Set up a call →.

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