Top 10 things to look for in a financial consultant

Suze OrmanIt's not what you know, but who you know -- especially when it comes to planning your finances. Most of us don't know a lot, which is why we need to know a financial consultant.

But every financial consultant is not equal in value. And the last thing we want is to hire a financial consultant who turns out to be the next Bernie Madoff. How can you tell the good financial consultants from the bad? Who better to turn to than Suze Orman, one of the most trusted financial consultants of our time? Here's what to look for and what to run from in a financial consultant:


Look For:
  • The financial consultant who is clear on costs. Any investment you make has costs, whether those are the financial consultant's fee, load or commission. A good financial consultant will be crystal clear on what this investment will cost you.
  • The financial consultant who diversifies. Your financial consultant should keep your money within FDIC limits and state guaranty limits on annuities, and not put all or most of your money into one investment.
  • The financial consultant who asks about your needs. Your financial consultant should ask you several questions: Do you have credit card debt? Is your job secure? Do you own a home or do you want to buy a home? Do you need to buy a new car soon? Do you have a will? Do you have a trust? Do you have health care issues? Your financial consultant must know how much you can truly afford to invest after you take care of your immediate needs.
  • The financial consultant who informs you of drastic changes. You should hear about changes in stock performance from your financial consultant first, not from the media.
Run From:
  • The financial consultant who rushes you. You know what they say about fools rushing in? That applies to investments. A financial consultant who says there is a deadline on the investment, Suze pointed out, is "a salesperson and not a financial consultant."
  • The financial consultant who wants to meet with you alone. If you have a spouse or have your finances linked with someone else, the financial consultant should not insist on meeting with you alone.
  • The financial consultant who doesn't answer your questions. If you request information on an investment from your financial consultant, he or she should provide specific answers -- on paper. Also, if you don't get quarterly or annual reports from your financial consultant, including the returns the financial consultant is getting and fees and commissions he or she is charging, that's a major red flag.
  • The financial consultant who asks you to make out a check directly to him or her. No financial consultant should receive a direct check. Instead, he or she should ask you to write a check to an institution. You don't want a financial "consultant" to take off with your money.

One Final Tip:

In a post-Madoff world, you need to find a financial consultant who has checks and balances in place. Sure, referrals to a financial consultant are good to get, but people who refer may have different financial goals from you. And Madoff certainly had his share of enthusiastic referrals. Instead of relying on word of mouth, you need to do hard-core personal research with independent institutions and auditing firms before hiring a financial consultant. What is the financial consultant's background and track record? Get a second opinion, just as you would with medical matters, and make sure you've found a financial consultant you can trust with your future.

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