With tax time* upon us, I thought it might be helpful to share my thoughts on financial advisors (aka consultants.) I am all in favor of paying for sound financial advice from professionals.

Although semi-retired (and financially independent) I follow several financial and retirement blogs. They often provide confirmation of the my financial/retirement philosophies, along with new ideas to consider.

One area where I disagree with many financial bloggers is the use of paid financial advisors. Too many demean those who do so, implying advisors are a waste of money. I strongly disagree!

Many people (especially my fellow members of the male gender) seem to feel they are smarter than the professionals, and smarter than the market. I suspect many feel they are smarter than the casinos, too. Perhaps too much ego?

So even if you are well versed in financial matters (as I think you should) getting independent advice may still be well worth it. I consider the money I’ve spent on both my CPA (Certified Public Accountant) and my CFP (Certified Financial Planner) to be well spent.

Even after the fees, I’m pretty sure I’m ahead of where I might be had I gone alone. That is the same argument I often make to clients for using my professional engineering services. Furthermore, I already pay for professional legal and medical advice — why not professional financial advice?

A bonus is the saved time that was better invested in making money on my own expertise. And to me, more enjoyable too.

The key to success is finding the right professionals with the right credentials, the right experience, and the right “fit.” You may need to interview several, but a good place to start is to ask business colleagues for referrals. That is how I found my team of advisors.

— Credentials — I use both a CPA and a CFP. I also use an attorney for estate planning. All three are in small firms, which I appreciate as a small business person myself. We all understand each other, and the challenges we face.

My CPA was a referral from a business colleague dating back 40 years. Over the years, my accountant changed after the first retired. My CFP was a referral from my CPA dating back 20 years. I’m also on the second CFP after the first retired. In both cases staying with one firm provided continuity.

As a bonus of sorts, the current CPA and CFP are both younger than me, which I expect will be advantageous as my wife and I age.

— Experience — All three advisors have many years of experience, particularly with small firms like mine. They also often share general business advice.

— Fit — Last, but not least, you must be comfortable with your advisor. Many years ago, I tried an estate attorney at a large downtown law firm with poor results. It was a referral from a friend, but not a good fit for me.

After being charged double what he estimated, I replaced him with a single person firm with much better results. No fancy office — no fancy suits — no fancy fees. Just good solid advice at much more reasonable rates. And honest estimates.

Some final thoughts…

First, go with a “fiduciary” which means being legally and ethically bound to act in your best interest. Unfortunately, not all advisors meet this criteria, thanks to good lobbying by those who are not fiduciaries.

Second, I prefer fees based on “money under management.” That way you are both on the same page — the better you do, the better your advisor does. “Fee only” advisors are good if you only want occasional advice. I would steer clear of commission based advisors.

Third, I prefer small professional firms much like my own engineering consulting firm. As an aside, my doctors and dentist are also small independent practices. Probably a personal bias, but it has worked well for me.

* Even though tax deadlines are now delayed, it’s back to work on my taxes. Actually, back to the very helpful tax worksheet supplied by my CPA. She will take it from there, and I am delighted to let her do so. I’ll stick with engineering.

As I once told my MBA/CFO son who was with an accounting firm at the time, “People like me will pay people like you big bucks to take care of this stuff.” He just grinned…

P.S. Special thanks to Tom G (CFP) & Jessica V (CPA).

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