As you go through life, many situations will occur where you need the assistance and advice of financial professionals. For instance, when you buy property, plan for the transfer of assets, protect your assets from catastrophic events, invest money, give money tax efficiently, and perhaps plan for the use of an unexpected large sum of money (e.g., windfall from life insurance, lottery winnings, or royalty income), you would consult a financial professional. Regardless of the type of financial professional you need to hire, there are some steps to take that will ensure the person you hire is the right person for your need. This publication will cover some of those steps. In addition, specific considerations for hiring an attorney, accountant, financial planner, and real estate professionals are covered.
Four Steps for Hiring All Financial Professionals
Have a clear understanding of what you want the professional to do and why you need to hire one. Be specific. Write down your needs so when you meet with the professional, everything is covered and you clearly communicate these needs. This will help the professional understand what you need and whether they can help you.
Gather background information about the professionals. This may take several steps if you want to be thorough. Call professionals and ask them to mail or email background information to you. Many professionals may have background information posted on a website. State or national regulatory organizations or professional associations may also be a source of information about the professional. Ask friends and relatives for suggestions based on their experiences.
Schedule a meeting and interview the professionals. Ask a few questions to test their technical knowledge. If you feel good about the interview, ask for three references of clients who have similar situations to yours and make sure to ask for one of the clients they have worked with since the early stage of their career and one who is a fairly recent addition to their list. When you talk to references, one question to ask is "Would you recommend this person to your son or daughter?" Probe to find out why or why not.
Please note: Attorneys and other professionals may be obligated to maintain confidentiality and will have to get client consent before they share their names for a reference.
Use the "Rule of Three." Interview at least three professionals for each type (e.g., attorney, financial planner, CPA, real estate broker) you plan to hire before making a decision. If you are married, remember that both individuals should be comfortable working with the professional you choose to hire.
General Questions to Ask Any Professional
- How long have you been in practice?
- How much experience do you have working on [the issue related to your need]?
- What are your qualifications? Tell me about your professional credentials, certifications, and how you stay updated or remain current in your field.
- Will you provide a written contract that outlines the service agreement and fees?
- How long will the work take? (If this is a specific task, ask for an estimated completion date. Write down the date.)
- Will any of my work be delegated to others, and if so, how much?
- How do you charge or get paid? (Are fees a flat rate or based on hours or some combination? If paid by commission, how is that amount determined?)
Attorneys can help you with legal matters and the tax implications of transferring property by developing legal documents such as wills and trusts. Before hiring an attorney, check with the appropriate regulators in the state where the attorney is doing business to see if they have any misconducts cited in their file. Also, according to the Pennsylvania Rules of Professional Conduct, attorneys are required to provide clients with a representation letter detailing their fee arrangement.
The Disciplinary Board of the Supreme Court of Pennsylvania
To determine if an attorney is in good standing in Pennsylvania, call the Disciplinary Board of the Supreme Court of Pennsylvania at 717-731-7083 or go to the Disciplinary Board of the Supreme Court of Pennsylvania website.
Additional Questions for Attorneys
- What are your areas of specialization?
- Are your clients primarily companies or individuals?
- Will you provide me copies of all relevant correspondence?
- What experience do you have in [your problem or need area]?
- Are there other costs I might incur that are not included in your basic fee structure?
- Are there ways I can reduce my costs while working with you?
Accountants are qualified to handle most of the day-to-day business of a firm and they can also be controller of a company. Certified public accountants (CPA) are accountants who have passed a rigorous exam and meet additional state education and experience requirements. Only CPAs can confirm that organizations/businesses are using acceptable standard practices of financial record keeping and that the records presented are accurate. CPAs can operate in virtually any area of finance (e.g., tax planning and preparation, financial analysis, financial planning, financial accounting, estate planning, venture capital, corporate finance,) so make sure the person you are considering has expertise in the area you need help with.
To get a list of CPAs in your area, contact the American Institute of Certified Public Accountants:
To check on a Pennsylvania accountant's professional standing, consult:
Pennsylvania State Board of Accountancy
PO Box 2649
Harrisburg, PA 17105-2649
To check the professional standing of accountants in other states, refer to your state's board of accountancy.
Additional Questions for Accountants Being Hired for Tax Expertise
- Are you available to answer tax questions throughout the year?
- How much experience do you have with tax situations like mine?
- Are you conservative or aggressive in interpreting tax laws and regulations? (A conservative accountant will follow the law specifically and interpret rulings in a manner that may be less favorable to you as a taxpayer but leaves little room for questioning the actions taken.)
- How much assistance do you provide if I am audited?
If you are hiring an accountant specifically for assistance with tax issues only, using an "enrolled agent" is another option. An enrolled agent is someone who is licensed by the U.S. Department of the Treasury to represent taxpayers before all levels of the Internal Revenue Service (IRS). They provide tax preparation, representation, planning, and other financial services to individuals and businesses. To locate an enrolled agent, contact:
The National Association of Enrolled Agents
1120 Connecticut Avenue NW
Washington, DC 20036-3953
Financial planners generally take a big-picture view of your financial situation and assist you in developing a strategy to cover all your personal financial needs. The typical areas planners address include your budgeting and cash flow needs, savings, investments, risk or insurance needs, taxes, retirement, and estate planning. Depending on the complexity of your situation, planners will also suggest you consult with other professionals (e.g., attorney, accountant).
Be aware that the financial planning industry is virtually unregulated. Therefore, you might find individuals in this industry who use the title "financial adviser" or "financial planner" with backgrounds in banking,insurance, or a nonfinancial area. Thus, you must be diligent about investigating or checking out financial planners or financial advisers before you hire one.
Financial planning professionals also have numerous designations or certificate credentialing programs. The list is rather extensive. For a complete list of designations (the letters behind their name), what they mean, and the type of educational program designees must complete in order to use the designations, go to the Financial Industry Regulatory Authority (FINRA) website. Click on "Professional Designation" on the left sidebar.
Additional Questions for Financial Planners
- What is your approach to financial planning?
- Could anyone besides me benefit from your recommendations?
- Can I have a written agreement outlining our working relationship?
- Have you ever been disciplined by the FINRA--Financial Industry Regulatory Authority (formerly NASD--National Association of Securities Dealers) or any regulatory agency during your career for unlawful actions?
- What type of clients do you specialize in?
- What services do you and your firm offer?
- Do you create a written financial plan for your clients?
- Do you spend time educating your clients about money?
- How do you service your clients?
- How many clients do you have now?
For a more detailed list of questions to ask financial planners/advisers and to locate a planner, refer to:
The Financial Planning Association
The FPA's website allows you to search by zip code for an adviser who has qualified as a Certified Financial Planner (CFP).
National Association of Personal Financial Advisors
This site allows you to search, also by zip code, for financial planners who operate on a fee-only basis.
Certified Financial Planner (CFP)
The Institute of Certified Financial Planners will provide you with referrals to CFPs in your area if you call them. It also offers what it calls a Financial Planning Resource Kit, a collection of free brochures that will answer most of your questions about the subject.
To check the professional standing of Pennsylvania financial planners and financial advisers, contact the Pennsylvania Securities Commission and FINRA. The commission maintains record of registered representatives, broker-dealers, investment advisers, and their employees. In addition, the commission answers investors' questions and provides information about the Pennsylvania Securities Act of 1972.
Pennsylvania Securities Commission
Eastgate Office Building, 2nd Floor
1010 North Seventh Street
Harrisburg, PA 17102-1410
Phone: 717-787-8061 or 1-800-600-0007
(PA residents only)
For research requests about investment advisers registered in Pennsylvania, go to the Pennsylvania Securities Commission website. Look for the "Services" section and click on "Online Research Requests." You can also call the above numbers.
Financial Industry Regulatory Authority (FINRA)
The Financial Industry Regulatory Authority (FINRA) is the largest nongovernmental regulator for all securities firms doing business in the United States. FINRA oversees nearly 5,000 brokerage firms, about 173,000 branch offices, and more than 677,000 registered securities representatives. FINRA offers BrokerCheck, a free online tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers.
FINRA was created in July 2007 through the consolidation of NASD (National Association of Securities Dealers) and NYSE Member Regulation (the member regulation, enforcement, and arbitration functions of the New York Stock Exchange). FINRA is dedicated to investor protection and market integrity.
Real Estate Professionals
Real estate professionals serve as an intermediary, or "middle man," between sellers and buyers of real property. Licensed by each state, they complete the necessary paperwork to close real estate transactions. An agency relationship is created when one person represents the interests of another. Pennsylvania real estate laws designate five different types of real estate agency functions or five different ways real estate professionals can interact with buyers and sellers:
- Seller agency: The real estate salesperson represents the interests of the property seller. This is the most common role.
- Buyer agency: The real estate salesperson represents the buyers' interests.
- Dual agency: Dual agency exists when a real estate salesperson is an agent for both the seller and the buyer in the same transaction.
- Designated agency: The employing broker may, with your consent, designate one or more of his employees to represent you-- either as a seller agent or a buyer agent.
- Transaction licensee: A salesperson who provides communication or document preparation services or performs other acts for which a license is required without being the agent or advocate for either the seller or the buyer.
Brokers and agents have completed courses of study and passed state licensing exams that allow them to use these titles and work as real estate professionals. However, brokers are licensed to manage their own real estate business; real estate agents must be employed by a broker.
Additional Questions for Real Estate Professionals
- How long have you been licensed?
- How long have you worked in this area as a real estate agent or broker?
- What professional organizations are you involved in? (The National Association of Realtors is a primary association for real estate professionals and members have the "Realtor" designation.)
- Do you work full-time in real estate?
- How will you market my house/property to sell it?
- What houses have you sold in the past 60 days? (Get the addresses so you can drive by to see them.)
- Are you a member of Multiple Listing Service (MLS)? The MLS provides the seller with expanded advertising through other real estate brokers.
Check the professional standing of real estate professional.
Prepared by Cathy Faulcon Bowen, associate professor of agricultural and extension education, Mark Douglass, extension educator in Jefferson County, and Robin Kuleck, extension educator in Elk County.