Ask an advisor: ‘I really want independent advice.’ How can I find a CFP that is not affiliated with a brokerage?
How do I find a certified financial planner (CFP) who is not affiliated with a brokerage firm? I really want independent advice and not be sent to sell me securities. I especially want tax advice. Everyone I called turned out to be affiliated with a real estate agency.
-Anonymously
This question shows that you are definitely on the right track to finding a financial advisor who will put your needs first.
There’s no surefire way to find the right match, but there are a few important filters you can use to increase your chances. (Looking for financial advice? This tool can help match you with potential advisors.)
Why CFP Certification Matters
Ask an advisor: ‘I really want independent advice.’ How can I find a CFP that is not affiliated with a brokerage?
Looking for a certified financial planner (CFP) professional is a fantastic starting point.
Obtaining the CFP certification is a rigorous process that requires you to complete extensive financial planning courses, pass a challenging exam, gain several years of experience, adhere to a strict code of ethics, and meet continuing education requirements .
Not all CFP professionals are independent, and some sell securities and other financial products. But no matter what, they have a significant amount of training and experience that allows them to provide better advice. (Looking for financial advice? This tool can help match you with potential advisors.)
Pay attention to compensation
One of the clearest signs of a financial advisor’s independence is his or her compensation model.
To be clear, there is no perfect compensation model that completely eliminates all conflicts of interest. Each model has some inherent biases that can impact an advisor’s recommendations.
But there are certain compensation models designed to minimize these conflicts of interest and better align an advisor’s compensation with the goals of his or her clients. Let’s break it down.
Commission-based financial advisors
Commission-based financial advisors are paid to sell financial products. That is, when you purchase an investment or insurance product that commission-based advisors have recommended, they receive a percentage of that purchase in the form of a commission from the financial company selling that product.
And while there are plenty of good commission-based financial advisors, this does incentivize them to recommend products that pay a larger commission. And it can align their financial interests with the companies that sell these products, rather than with their customers.
Some commission advisors are affiliated with a brokerage or insurance company and recommend these products exclusively or almost exclusively. Other commission advisors are independent, meaning they can recommend products from any financial company. Either way, they get paid to sell. (Looking for financial advice? This tool can help match you with potential advisors.)
Fee-only financial advisors
Fee-only financial advisors receive no commission. Instead, they are paid directly by their customers. This payment usually takes the form of fixed fees, hourly rates or a percentage of the assets under management.
These arrangements may involve conflicts of interest. For example, hourly rates can encourage advisors to work longer instead of smarter. Assets subject to management fees may encourage recommendations to build investment accounts at the expense of other goals. There is no perfect compensation model.
But the fee-only model is designed to minimize conflicts of interest by ensuring that advisors are paid by their clients, not the financial firms, and by aligning that payment as closely as possible with objectives of the customer.
Additionally, almost all fee-only financial advisors are independent, meaning they can recommend anything they think will serve your goals.
Fee-based financial advisors
Fee-based financial advisors are a mix of the two models above. Some of their compensation comes directly from their customers, and some of it comes in the form of commissions.
The balance between client fees and commissions here can vary widely between advisors, so you’ll need to do your due diligence. In addition, some fee advisors are independent and some are affiliated with a brokerage or insurance company.
How to find a fee-based independent financial advisor
Ask an advisor: ‘I really want independent advice.’ How can I find a CFP that is not affiliated with a brokerage?
If you’re looking for independent financial advice, your best bet is a fee-only CFP professional. There are no guarantees, but this route means you get someone with training and experience, and who will do their best to match their pay to your interests.
Here are a few different places you can find a fee-only planner:
SmartAsset. SmartAsset connects people with financial advisors through this free matching tool.
NAPFA. The National Association of Personal Financial Advisors is a network of fee-based fiduciary financial advisors. With the search function you can search by expertise, but also by fee structure and life stage.
Garrett Planning Network – This is a network of fee-based financial planners who offer hourly planning services, although some also offer other fee arrangements. Members must obtain their CFP certification or a combination of Certified Public Accountant (CPA) and Personal Financial Specialist (PFS) certification within five years of opening their business.
XY Planning Network – This network was created specifically to serve younger customers (Gen X and Gen Y). Each advisor is paying and offers virtual services. Every advisor in their search tool is a CFP professional.
Alliance of Comprehensive Planners – The ACP is a network of fee-based financial advisors, with a specific focus on tax planning (which may be exactly what you’re looking for). Not all advisors are CFP professionals, but their designations are clearly displayed in search results, making it easy to filter on your own.
Next steps
References and compensation are important. If you start your search for a financial advisor by looking for a fee-only CFP professional, this is a great way to filter out many people who may not be as experienced or independent as you would like.
Don’t forget to focus on the “you” part of this search as well. Find someone who listens to you, can clearly articulate your goals and values ​​to you, and has experience working with people like you and in your situation.
Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Consider a few advisors before choosing one. It’s important to make sure you find someone you trust to manage your money. As you consider your options, these are the questions you should ask an advisor to ensure you make the right choice.
Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not at risk of significant fluctuations like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But with a high-interest account, you can earn compound interest. Compare savings accounts from these banks.
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Matt Becker, CFP®, is a financial planning columnist at SmartAsset, answering reader questions about personal finance and tax topics. Do you have a question that you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Matt is not a participant in the SmartAsset AMP platform, nor an employee of SmartAsset, and has received compensation for this article.
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