Many educators decide they need help choosing investments for their 403(b) or 457 plans. If you’re among them, you might be looking for a financial advisor. But it’s important to keep in mind that many of the representatives who come to your school to talk about investment products have a conflict of interest: They may be earning a commission based on what they can get you to buy.
So your first step is to make sure you are getting objective advice. Instead of asking a sales representative what you should buy, think about hiring a fee-only financial advisor. Because fee-only advisors don’t receive commissions, they may be more likely to be objective about what to recommend to you. Here are a few tips:
- Ask what the advisor’s credentials are. Is she/he a Certified Financial PlannerTM? Registered Investment Advisor or other credentialed individual? While having credentials is no guarantee, it does indicate the individual’s level of understanding and commitment to the investment profession.
- Ask whether the advisor is working in a fiduciary capacity. That means the advisor is legally and ethically required to put your best interests first when making an investment recommendation.
- Ask how they are paid. Are they paid commissions for selling certain products, or do they only earn a fee charged to their clients for the services provided? If you can determine how they are paid, it will help you understand who they are really working for.
- Once you start working with the advisor, does he or she contact you regularly? You should have a review at least once a year to make sure you are on track.
- Can you easily contact your advisor if you have a question?
- What are you paying for the advice? And what are you paying in fees for the investments that are recommended?
Finding an Advisor
There are a number of ways to find an advisor. Ask friends and family if they can recommend someone they trust. You can also search for fee-only financial planners at the National Association of Personal Financial Advisors. It is also a good idea to interview multiple advisors before making a decision to work with somebody.
For more information about choosing a financial advisor and understanding the fees you pay, download a copy of the CTA Guide to Working with a 403(b) or 457 Advisor.