Finding a financial advisor

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5oclocksomewhere
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Finding a financial advisor

Post by 5oclocksomewhere » Sun Sep 05, 2010 1:37 am

How do I find a good financial planner that doesn't have conflicts of interest by selling products? And how do they charge for services? Thanks!

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White Coat Investor
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Re: Finding a financial advisor

Post by White Coat Investor » Sun Sep 05, 2010 3:00 am

5oclocksomewhere wrote:How do I find a good financial planner that doesn't have conflicts of interest by selling products? And how do they charge for services? Thanks!
3 choices:

1) Hourly-few and far between, incentive is to spend more time with you
2) Assets under management, incentive is to grow your portfolio but also to discourage withdrawals for other investments or for debt paydown
3) Commission-most common, paid for what they sell you.

Try Garrett Financial network
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

livesoft
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Post by livesoft » Sun Sep 05, 2010 6:44 am

This is an excellent question that has no easy answer. I wish the answer would be fleshed out more in this thread and perhaps incorporated into the boglehead wiki.

My sister got referrals from her friends and church members. You can look in the phone book and you can look at web sites like Garrett. But that only gets you a list of names and phone numbers. How do you decide if any of them are competent and how they are paid?

It was stated on the registered rep web site by advisors that 90% of advisors are really not good. Furthermore, referrals are practically useless because folks do not want to admit they are using a poor advisor. The advisor must be good if they are using them, right? They would'nt be using a poor advisor would they? So if you get the names of 5 advisors, the chances are pretty good that they would all be poor choices for you.

It's a problem.

kenbrumy
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Re: Finding a financial advisor

Post by kenbrumy » Sun Sep 05, 2010 6:53 am

5oclocksomewhere wrote:How do I find a good financial planner that doesn't have conflicts of interest by selling products? And how do they charge for services? Thanks!
Go directly to the nearest mirror. Take a good look at your financial adviser. I suggest you start reading and learn enough to do it yourself. It isn't really hard.

My advice would only change if you have complicated or extenuating situations in your personal or financial life.

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Rob54keep
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Post by Rob54keep » Sun Sep 05, 2010 6:54 am

After 3 different attempts to get a FP I was able to find one from Garrett Network that fits my investment style, hourly pay and values perfectfully. It may be frustrating initially but its worth the effort. Do NOT compromise!!! :!:

GaryPantaloukas
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Post by GaryPantaloukas » Sun Sep 05, 2010 11:39 am

livesoft wrote:This is an excellent question that has no easy answer. I wish the answer would be fleshed out more in this thread and perhaps incorporated into the boglehead wiki.

My sister got referrals from her friends and church members. You can look in the phone book and you can look at web sites like Garrett. But that only gets you a list of names and phone numbers. How do you decide if any of them are competent and how they are paid?

It was stated on the registered rep web site by advisors that 90% of advisors are really not good. Furthermore, referrals are practically useless because folks do not want to admit they are using a poor advisor. The advisor must be good if they are using them, right? They would'nt be using a poor advisor would they? So if you get the names of 5 advisors, the chances are pretty good that they would all be poor choices for you.

It's a problem.
Actually what they said was that 90% of advisors wash out, because they aren't able to earn enough.

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ruralavalon
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Post by ruralavalon » Mon Sep 06, 2010 11:27 am

Look for a "fee only" advisor (not a "fee based" advisor), who charges by the hour or by the task. This greatly minimizes conflicts of interest. Be specific on what you want done, and ask what portion of their clients are in situations similar to your situation with similar sized portfolios. Ask about their attitude on index investing and costs. Look for a CFP designation, and ask for their ADV II disclosure. Here are some ideas on choosing an advisor -- http://investingessentials.blogspot.com ... visor.html .

Try these sites to locate a planner in your locality --
http://www.garrettplanningnetwork.com/ ; or
http://www.napfa.org/ ; or
http://www.acaplanners.org/index.aspx .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Gano_REX
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Post by Gano_REX » Mon Sep 06, 2010 11:52 am

Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.

It really depends on what you are looking for. Some firms specialize in certain things, and limited in others. What type of account are you looking for?

TimDex
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B.S.

Post by TimDex » Mon Sep 06, 2010 12:10 pm

I know I can be intemperate, say things I quickly regret, etc.

However, there are times when it is appropriate. I'm calling B.S. on this guy

Gano whatever Rex...
Don't fall into the trap of focusing too much on fee or how they are paid.
That is a guaranteed way to get taken....and is in my opinion a pretty obvious cover for someone who is a registered rep trying to counteract a boglehead way to doing your investments.

This is the problem in dealing with advisers. Most of them can't be trusted with the silverware. If you want an adviser, and find one, then I strongly suggest you post his recommendations here for a second opinion.

Tim W.
"All man's miseries derive from not being able to sit quietly in a room alone. " -- Pascal

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bigROI
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Post by bigROI » Mon Sep 06, 2010 12:23 pm

Make it your desire to become your own. Learn more about risks you are willing to take then invest in mutual funds that seek to achieve it. Consider your age, egg size and risk tolerance and tylor. You can get a lot of free info here if you post a request. Here is one place to start
http://investingessentials.blogspot.com ... sense.html

livesoft
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Post by livesoft » Mon Sep 06, 2010 12:32 pm

Another interesting place that touts advisors is www.investorguide.com which has some pretty hilarious articles written by advisors obviously trolling for business. For example, http://www.investorguide.com/igu-articl ... ional.html has the following
People who are pro's in any field don't have to spell it out. When it comes to a potential financial advisor, you can tell by the advisor's behavior whether s/he knows what s/he's doing - or not. Just like John Elway, a good trusted advisor's competence and trustworthiness will likely be demonstrated by behavior, delivery, and follow up.
Actually the whole article is so pathetic it is worth reading for the entertainment value.

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ruralavalon
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Post by ruralavalon » Mon Sep 06, 2010 2:51 pm

Gano_REX wrote:Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.
NO!!! It really does make a difference. A commissioned salesperson has the enormous incentive to sell you the product with the highest commission (load), that is how they make their money. Likewise a "fee based" planner is compensated at least partially by commission.

As an investor, you want control of the compensation and want the loyalty of the advisor to be to you.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

jwkde
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Post by jwkde » Mon Sep 06, 2010 3:04 pm

I think you also need to be clear what you want the planner to do?

I hear people say they went through a finanical plann(er) and came away with a bunch of investments. When I asked them what is the plan they either do not know or refer to what they are investments they bought.

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Charybdis
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Re: Finding a financial advisor

Post by Charybdis » Mon Sep 06, 2010 3:52 pm

5oclocksomewhere wrote:How do I find a good financial planner that doesn't have conflicts of interest by selling products? And how do they charge for services? Thanks!
Why do you need a financial advisor? Who else could better manage your wealth than yourself? Study the Bogleheads Wiki and the recommended books, and you get the required information.

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dandan14
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Post by dandan14 » Mon Sep 06, 2010 4:30 pm

I know some folks have told you that you are your own best financial advisor -- and that can be true. But you can also sometimes be your best car mechanic -- but most people understand the tradeoffs of paying for that expertise rather than acquiring it themselves.

Find a boglehead-ish planner by checking NAPFA.org. I would also set CFP (Certified Financial Planner) as a minimum criteria. (It is also nice to find a planner who is a CPA in addition to CFP.) NAPFA is an organization of fee-only planners who typically have an hourly rate (although some also do assets under management). After going through the CFP curriculum myself and working with a couple of fee-only CFPs, I have a new respect for how much input they give, not just on investments but on every aspect of your financial life.

The Garrett network that someone mentioned earlier is a loose federation of fee only planners that are using software from the Garrett Network. I believe they are fee only as well. Not sure if all Garrett planners are CFPs.

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Charybdis
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Post by Charybdis » Mon Sep 06, 2010 5:04 pm

Rick Ferri mentions some options here: http://www.bogleheads.org/forum/viewtop ... 971#811971

Gano_REX
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Re: B.S.

Post by Gano_REX » Mon Sep 06, 2010 5:20 pm

TimDex wrote:I know I can be intemperate, say things I quickly regret, etc.

However, there are times when it is appropriate. I'm calling B.S. on this guy

Gano whatever Rex...
Don't fall into the trap of focusing too much on fee or how they are paid.
That is a guaranteed way to get taken....and is in my opinion a pretty obvious cover for someone who is a registered rep trying to counteract a boglehead way to doing your investments.

This is the problem in dealing with advisers. Most of them can't be trusted with the silverware. If you want an adviser, and find one, then I strongly suggest you post his recommendations here for a second opinion.

Tim W.
Think what you would like to support your position, but it is just a fact of life that Fee-Only isn't always the best thing. If you are just investing in mutual funds or ETFs with the occasional rebalancing, then that could make sense. It really depends on what you are looking for.

Gano_REX
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Post by Gano_REX » Mon Sep 06, 2010 5:32 pm

ruralavalon wrote:
Gano_REX wrote:Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.
NO!!! It really does make a difference. A commissioned salesperson has the enormous incentive to sell you the product with the highest commission (load), that is how they make their money. Likewise a "fee based" planner is compensated at least partially by commission.

As an investor, you want control of the compensation and want the loyalty of the advisor to be to you.
I don't understand this logic at all. Commissions are ONE way to pay for service. Fee-based is another. Fee only is another. If you want to pay for advice, you have three options on how. It isn't the wild west out there guys, there are rules and regulations governing them. Maybe it could happen if you went to some sleazy firm - but that is easy to avoid.

Also, how I understand it, is fee-based cannot get commissionable business. It is either pay a fee on your account value, or pay a commission per product. Not both.

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NYCPete
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Post by NYCPete » Mon Sep 06, 2010 6:26 pm

Gano_REX wrote:
ruralavalon wrote:
Gano_REX wrote:Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.
NO!!! It really does make a difference. A commissioned salesperson has the enormous incentive to sell you the product with the highest commission (load), that is how they make their money. Likewise a "fee based" planner is compensated at least partially by commission.

As an investor, you want control of the compensation and want the loyalty of the advisor to be to you.
I don't understand this logic at all. Commissions are ONE way to pay for service. Fee-based is another. Fee only is another. If you want to pay for advice, you have three options on how. It isn't the wild west out there guys, there are rules and regulations governing them. Maybe it could happen if you went to some sleazy firm - but that is easy to avoid.

Also, how I understand it, is fee-based cannot get commissionable business. It is either pay a fee on your account value, or pay a commission per product. Not both.
Unless it is a load mutual fund with a 12b-1 fee (or whatever the new name for 12b-1 fees are going to be now, per SEC proposal). In that case, the advisor is making money off the initial sales charge AND getting a cut of your money every year.

I disagree that it's not like the wild west. Anyone who passes the Series 7/63 can "hang a shingle" as the saying goes, and call themselves an "advisor" when really they're just a registered rep, which means nothing in terms of knowledge. There's no regulation stopping them from doing just that.

Compensation is crucial to know if they're acting in your best interests.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

Gano_REX
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Post by Gano_REX » Mon Sep 06, 2010 6:32 pm

NYCPete wrote:
Gano_REX wrote:
ruralavalon wrote:
Gano_REX wrote:Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.
NO!!! It really does make a difference. A commissioned salesperson has the enormous incentive to sell you the product with the highest commission (load), that is how they make their money. Likewise a "fee based" planner is compensated at least partially by commission.

As an investor, you want control of the compensation and want the loyalty of the advisor to be to you.
I don't understand this logic at all. Commissions are ONE way to pay for service. Fee-based is another. Fee only is another. If you want to pay for advice, you have three options on how. It isn't the wild west out there guys, there are rules and regulations governing them. Maybe it could happen if you went to some sleazy firm - but that is easy to avoid.

Also, how I understand it, is fee-based cannot get commissionable business. It is either pay a fee on your account value, or pay a commission per product. Not both.
Unless it is a load mutual fund with a 12b-1 fee (or whatever the new name for 12b-1 fees are going to be now, per SEC proposal). In that case, the advisor is making money off the initial sales charge AND getting a cut of your money every year.

I disagree that it's not like the wild west. Anyone who passes the Series 7/63 can "hang a shingle" as the saying goes, and call themselves an "advisor" when really they're just a registered rep, which means nothing in terms of knowledge. There's no regulation stopping them from doing just that.

Compensation is crucial to know if they're acting in your best interests.

Best,
Peter
In fee-based, the adviser would not be getting a commission on the load fund and most times not the trailing fee either. The 12b-1 fee was created back to me when I used to have mutual funds in a fee-based acccount.

And true, there isn't a regulation in place to keep morons from being an advisor, but there are plenty of people who don't go throwing money at the first advisor to breath on them. Those morons I assume just starve and go elsewhere.

Scottner
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Post by Scottner » Mon Sep 06, 2010 7:11 pm

Don't fall into the trap of focusing too much on fee or how they are paid. It is important to know, but one type of advisor (commission/fee-based/fee-only) is limited by what they can offer you.
Reading posts like this reminds me of the TV show "V". They are among us now.

5oclocksomewhere
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Post by 5oclocksomewhere » Tue Sep 07, 2010 3:29 pm

Thanks everyone for your responses! For me personally, I would prefer an advisor that charges along the lines of a one rate fee for what my needs are. However, I do value the advice on the forum and am considering doing this on my own. Now that the kids are back in school, I'll have the time. My problem is that I delve into "projects" and they tend to start taking time away from the kids etc. (I'm sort of obsessive that way). I'm a stay-at-home mom so now I'll consider the financial planning to be my "other" job.

My husband and I have had a negative experience with our other "professional".

Here's what happened. We were referred by a friend to get our taxes done by this accountant (the friend's relative). She did our taxes and then we got a letter from her saying that she will only do taxes for clients who invest with her and was basically dropping us because we hadn't invested with her. Well, we went, oh, OK, we'll invest with you then. Is there some kind of ethical problem with this? It didn't seem right at the time. It seems like she should have told us before even doing our taxes. I've wondered about this for quite a while. She'd call me and say "I think you should buy this stock" and I say what is it, and she'd reply "I don't know, something with computers"! There was no planning involved, just wanting us to buy stocks. Of course it turns out she was terrible and we paid for it!

My needs are basically just looking at our portfolio to see if we are properly investing taking our ages and risk tolerance level into account, and see what else we could be doing. So, I'll be posting what we currently have on another thread by Monday the 13th, and go from there. Thanks again!

freebeer
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Post by freebeer » Tue Sep 07, 2010 3:34 pm

The Bogleheads/Vanguard view is "keep costs low".

You can have a 60/40 (stock/bonds) split and pay only .15% in expense ratio if you go with low-cost funds. Annual rebalancing isn't rocket science.

Any advisor will cost you .25% or more, which more than doubles your cost. DIY seems the way to go.

EO 11110
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Post by EO 11110 » Tue Sep 07, 2010 3:51 pm

if one doesnt know enough to run their own money, how can they evaluate an advisor or an advisor's recommendations?

with the www, there's very little standing in the way -

all signs point to educating yourself 8)

5oclocksomewhere
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Post by 5oclocksomewhere » Tue Sep 07, 2010 3:56 pm

EO 11110 wrote:
all signs point to educating yourself 8)
Yes, I should have said I'll consider our investment planning my other job AND I'll be going back to school at the same time :wink:

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ruralavalon
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Post by ruralavalon » Tue Sep 07, 2010 3:59 pm

5oclocksomewhere wrote:. . . . For me personally, I would prefer an advisor that charges along the lines of a one rate fee for what my needs are. However, I do value the advice on the forum and am considering doing this on my own. Now that the kids are back in school, I'll have the time. My problem is that I delve into "projects" and they tend to start taking time away from the kids etc. (I'm sort of obsessive that way). I'm a stay-at-home mom so now I'll consider the financial planning to be my "other" job.

. . . . . . .

My needs are basically just looking at our portfolio to see if we are properly investing taking our ages and risk tolerance level into account, and see what else we could be doing. So, I'll be posting what we currently have on another thread by Monday the 13th, and go from there. Thanks again!
No matter which direction you decide to go, you will serve yourself well by doing some reading. Here is a list of books, you might begin with one or two from the General Investing section -- http://www.bogleheads.org/readbooks.htm . I would suggest The Bogleheads' Guide to Investing.

When you post your current portfolio, it will help if you follow this format -- http://www.bogleheads.org/forum/viewtopic.php?t=6212 .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

dbr
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Post by dbr » Tue Sep 07, 2010 4:01 pm

5oclocksomewhere wrote:
Here's what happened. We were referred by a friend to get our taxes done by this accountant (the friend's relative). She did our taxes and then we got a letter from her saying that she will only do taxes for clients who invest with her and was basically dropping us because we hadn't invested with her. Well, we went, oh, OK, we'll invest with you then. Is there some kind of ethical problem with this? It didn't seem right at the time. It seems like she should have told us before even doing our taxes. I've wondered about this for quite a while. She'd call me and say "I think you should buy this stock" and I say what is it, and she'd reply "I don't know, something with computers"! There was no planning involved, just wanting us to buy stocks. Of course it turns out she was terrible and we paid for it!
That is appalling. You should have dropped her even faster than she could drop you. There are plenty of professional and ethical tax accountants none of whom would operate using that kind of business model. Among other things, you might want to review your tax returns to find out what mistakes this person may have made.

EO 11110
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Post by EO 11110 » Tue Sep 07, 2010 4:05 pm

5oclocksomewhere wrote:
EO 11110 wrote:
all signs point to educating yourself 8)
Yes, I should have said I'll consider our investment planning my other job AND I'll be going back to school at the same time :wink:
wow! full plate.

imo this board is a great start. the collective knowledge is impressive. and the members jump at the chance to help with any questions.

the only thing lacking in the discussion here is conversation about government/tax policy/federal reserve (voicing opinions on those topics is forbidden). it's a big hole, but you can fill it elsewhere

Gano_REX
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Post by Gano_REX » Tue Sep 07, 2010 4:34 pm

EO 11110 wrote:if one doesnt know enough to run their own money, how can they evaluate an advisor or an advisor's recommendations?

with the www, there's very little standing in the way -

all signs point to educating yourself 8)
You guys don't need to buy or sell whatever the advisor tells you. If you aren't sure, it is their JOB to explain it to you. If they explain to the best of their ability, and you still aren't sure, then don't buy/sell. It is that simple. A good advisor can tell you exactly what is up.

Like the above poster, the answer "Um IDK, something with computers" is NOT a good answer. I would have fired them if they came to me with that.

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pointyhairedboss
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Post by pointyhairedboss » Wed Sep 08, 2010 2:42 pm

You guys don't need to buy or sell whatever the advisor tells you. If you aren't sure, it is their JOB to explain it to you. If they explain to the best of their ability, and you still aren't sure, then don't buy/sell. It is that simple. A good advisor can tell you exactly what is up.
It is not that simple. If you don't have some background on investments, than you can be easily persuaded to do things against your interests. Some investments guidelines are counter intuitive. Take for example,
"Fund returns on post expenses, so its more important to look at the performance record rather than costs, because cost is already factored in".

or

"The Harold and Smith Emerging Mark fund has outperformed the S&P 500 over the last 1, 3, and 5 years running. Do you want an index fund, or this stellar fund?"

These comments sound perfectly plausible unless you have a knowledge on how costs affect returns.

lawman3966
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Post by lawman3966 » Thu Sep 09, 2010 10:54 pm

ruralavalon wrote:Look for a "fee only" advisor (not a "fee based" advisor), who charges by the hour or by the task. This greatly minimizes conflicts of interest. Be specific on what you want done, and ask what portion of their clients are in situations similar to your situation with similar sized portfolios. Ask about their attitude on index investing and costs. Look for a CFP designation, and ask for their ADV II disclosure. Here are some ideas on choosing an advisor -- http://investingessentials.blogspot.com ... visor.html .

Try these sites to locate a planner in your locality --
http://www.garrettplanningnetwork.com/ ; or
http://www.napfa.org/ ; or
http://www.acaplanners.org/index.aspx .
I was just perusing the thread, but got something quite valuable out of this. I have now explored the Garrett network, found someone near us geographically, and they may be quite valuable to us. Our company may require a financial advisor to come in once a year to assist the more novice investors, and the Garrett approach seems like a much better deal than paying a percentage of assets to an advisor firm.

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