Money Matters

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Finding a financial advisor

The financial industry has changed over the last half decade, and middle class men and women looking to grow their money have no doubt experienced that change firsthand. Unlike in years past when large financial firms welcomed middle class investors with open arms, many firms now take no such approach, offering little to no incentives to their own brokers for accounts that are not in excess of half a million dollars or more.

Much of this shift can be traced to heightened scrutiny of the financial industry in response to the economic downturn that began in 2008. More regulations and higher costs have made it less cost-effective for financial firms to cater to middle class investors, many of whom are in the dark about the best ways to grow their money. But even though the industry has changed, men and women can still find financial advisors who can help them plan their financial futures.

• Recommendations: Arguably the best way to find a financial advisor is to seek recommendations from family and friends, ideally those in similar financial shape as you. Though larger firms may prefer to ignore middle class investors, some firms make a point of catering to this oft-underserved market. When asking friends and family for recommendations, try to determine if any of the people you speak with have their own broker or simply speak with customer representatives when issues arises. Companies that provide you with your own broker may be easier to work with and more likely to listen to your concerns than those that do not assign you your own broker.

• Fees: When on the lookout for a financial advisor, inquire about the fees you would have to pay if you chose a particular firm. Annual fees typically hover around 1 percent, but some firms willing to take smaller investors may charge nearly double that, knowing that middle class investors have few other options at their disposal. Determine the fees a firm will charge before making your final decision. When asking about fees, ask the representative to explain the details of each fee, noting if the firm will earn a specific amount if they sell you a particular product. If they will, they may be incentivized to sell you a certain product even if that is not necessarily in your best interest.

• Services: It's also important to distinguish between the services each firm provides. Some will only sell you advice, while others offer comprehensive planning that can help you in various areas, including retirement, estate planning and tax planning. Choose the firm whose offerings best match your needs.

• Approach: Many investors find it's best to work with financial advisors whose approach to investing and financial planning matches their own. If you're risk averse, then you likely won't be comfortable working with a financial planner whose approach is aggressive. Likewise, if your goal is to make as much money as possible and you don't mind taking risks, then a more conservative planner likely won't be able to yield the types of results you're looking for. Identify your own approach to investing and planning, and then look for a planner who shares that philosophy.

Upon looking for a financial advisor, smaller investors may no longer find an industry that's waiting to welcome them with open arms. But there are ways for middle class investors to find financial planners who are willing and capable of managing their money.