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How African-Americans Can Find a Financial Advisor

One of people’s biggest worries about retirement is that they will run out of money.  It’s a legitimate concern, considering that most people haven’t saved nearly enough for retirement and many have saved nothing.

Still, according to a survey by Voya Financial, less than a third of the Americans work with a financial professional, even though people who did saved three times more for retirement.

When it comes to African-Americans, the numbers are even worse. Just over 1 in 10 African-Americans work with a financial professional, according to Prudential’s 2015-2016 African American Financial Experience. Most say they don’t have a relationship with a financial adviser because they don’t have enough assets, or they prefer to manage their own money.

African-Americans may also be frustrated when trying to find a person of color to help them. The CFP Board of Standards says out of the nearly 74,000 Certified Financial Planners in the U.S., less than 1 percent are African-American.

“The goal of hiring a financial adviser is to have someone to help you achieve economic security or financial stability,” says Theodore Daniels, founder and president of the Society for Financial Education and Professional Development.

So, where do you start?

First, ask for referrals. Not from the brother-in-law who always borrows money. Talk to people you admire and believe are smart about saving and investing.

“I would say probably 85 percent of our clients come from personal introductions,” says Eric Bailey, founder and CEO of Bailey Wealth Advisors in Silver Spring, Md. “I would suggest that most people start with someone that, at least from their assessment, appears to be financially sound, and ask who it is they are using.”

“Talk to friends, and they don’t have to be African-American friends,” says Daniels. “Get referrals. Who are they working with and what level of service do they provide?”

Deborah Owens, author and talk show host, says you should attend free seminars sponsored by financial companies such as Fidelity Investments or T. Rowe Price.

“I say go in person,” she says. “Then you can see how someone is conducting themselves and how they answer questions. You don’t want to feel obligated, but you can get a sense of people’s methodology and their investment process.”

You should also identify financial advisers based on your need, Owens says. You may need someone who specializes in estate planning. Or someone who works with novice investors, or people in life transitions, like widows.

“Look at your needs and match them to the needs of the adviser.”

Also check the websites of organizations like The Financial Planning Association (FPA), the CFP Board and the Association of African American Financial Advisors.

It is important to understand the difference between an investment advisor and a financial planner. An investment advisor will manage your assets and investments and broker the sale and/or purchase of stocks. A financial advisor will actually help you develop a financial and retirement plan and assist you in meeting your long-term financial needs.

And, ask for references.

The next step: find the right fit.

Determine what your core values are and what is important to you: saving, protecting assets, education for your children, a new home, Daniels says.

“A lot of people go through life and do not know what their values are,” he says. “Knowing the core values upfront will help identify the type of financial adviser you want.”

“You want to choose a financial advisor who is able to provide financial education,” he says. “In the African-American community, the financial literacy level is low. You need a financial advisor to teach you finance, credit, investments and risk management. If you don’t have a financial advisor willing to provide you with financial education, you will pull back. You have to be comfortable.”

Owens says you should also pay attention to the credentials.

“The gold standard is the Certified Financial Planner (CFP). CFPs are required to take course work and sit for an exam, much like a Certified Public Accountant.”

“It is a rigorous designation,” says Bailey. “Most people get it five to seven years in. You know the person has an understanding of investments, budgeting, credit, estate planning, retirement issues, Medicare and Social Security.”

Ask the right questions

The next step should be to set up an interview with the advisors you are considering.

“Generally, you set up an initial meeting,” says Bailey. You should interview the (candidate) as to whether they meet your needs. You want to know the educational level, [and] whether they are a planner or an investment advisor.

“I’d also suggest people ask what percentage of the advisor’s client base fits their demographic,” he says. “If I’m someone that is 55 years old and I’m making $70,000 and my husband makes $60,000, and we have two kids, is that the demographic they are working with, or are they working with 30-year-olds or 20-year-olds or 70-year-olds? You want the person to have experience with what your issues are instead of someone learning as they go.”

Owens says some of the qualities of an effective financial advisor are: they should be trustworthy, an educator and a good listener.

“A good adviser will ask questions and allow you to talk vs. them talking,” she says.  “And the most important thing is how often do you meet with clients? This is a pet peeve. You’ve got to check with your clients at least quarterly, and at the bare minimum, annually. You need to earn you clients’ trust and they need to feel like you are earning your fees.”

And it is important to ask about fees. Many experts suggest you find a fee-only planner, as opposed to one who charges a percentage of your assets.

“That’s always a big question to put on the table early,” says Bailey. “How does the person get paid?”

Ask if they are independent or captive, Bailey says.

“That will give the potential client some sense of how objective the person is,” he says. “An independent advisor is essentially beholden to no large company. They are able to direct a client to whatever solution best fits. An independent person can go across the spectrum. A captive advisor can only offer you what is on the shelf.”

It’s also the time to ask about their background. Check websites such as BrokerCheck and the CFP Board to view complaints or any actions against the advisor.

Bailey says there has to be a connection between you and the financial planner.

“It would be ideal if you bonded,” he says. “If you have trust and accountability, the bonding comes. There needs to be a full understanding of what is important. The advisor needs to drill down and get to the core of what this person is.

“The final step in the whole process is implementation,” he says. “The advisor and the client should work together to build a solid team. For most families that means a good accountant, a good banker relationship and a good estate attorney. Building that team allows more oars in the water, and everyone rowing in the right direction.”