Financial advisors are powerful people. Because they manage money, they also, in a sense, manage lives. This fact means that your financial advisor holds a critical role in your life, both in the present and the future. You and family depend upon the fruits of your labor for so many things, which is why it’s important to find the right financial advisor. The question is—how to find a good one? Naturally, your financial advisor must have the proper credentials. He or she must be educated and knowledgeable in the field of managing of money. But your financial advisor must also be respectful of you, the client, and must also be trustworthy. Here are some tips from top financial advisors on how to tell if you’ve found a good one.
In the financial industry, it’s referred to as ‘fiduciary responsibility.’ It’s just a fancy way of saying a financial advisor is trustworthy. A fiduciary mentality is perhaps the first, last, and most important trait of a good financial advisor. If you see red flags that make you think your financial advisor does not have this type of mindset, take the money and run! By law, they must observe best practices with the best interest of you and your money in mind. By principle, they should observe these best practices with the best interest of you and your money at heart.
A good financial advisor is see-through—he or she puts in writing full disclosure of all experience, education, compensation, and particularly conflicts of interest. As the client, you have a right as well as a duty to know all factors that could influence your advisor’s performance.
Naturally, in every profession credentials are a given. But when it comes to hiring a financial advisor, credentials such as certifications are a must. For example, a CFP (Certified Financial Planner) generally has more education and most definitely holds more certification than other advisors. Any financial advisor worth their weight—and your money—will have necessary education as well as certification. It’s important to note that in today’s financial industry, many folks are calling themselves ‘financial planners,’ but they have little to no education or experience handling your money. Always check credentials.
A good financial advisor has a good deal of experience under his or her belt. Again, too many people in the financial industry in today’s market are calling themselves financial planners, but in truth are working for companies who provide specific materials and push specific financial products. This means their knowledge, and more importantly, their experience are both quite limited. They haven’t been in the business long enough, and they haven’t worked with enough clients, to understand how to customize a financial strategy based on each individual’s needs.
Your financial advisor needs to have a clean regulatory record. There are a number of different websites where you can check your potential financial advisor’s background, but the most trusted is the broker-check website of FINRA (Financial Industry Regulatory Authority). Here you can obtain a report that will include such information as work history, certifications, citations, and any investigations that have been done on your potential hire. These reports will include such details as what occurred to bring the investigation, why it was brought, what the outcomes were, and any penalties that were assessed.
This may seem like it’s not as important as the others, but it actually may be more important. A good financial advisor will be connected with peers in the same industry. Being disconnected with those peers can reflect peer disrespect, and if it does, you need to either find out why or run. Reconsider hiring a financial advisor whose peers do not respect him or her. A good financial advisor will be a member of an organization such as the Society of Financial Services Professionals.
Finding a good financial advisor is about so much more than just investing and making money. You need to know you’ve found someone who observes best practices at all times where your money is concerned. The list of traits that make up a good financial advisor is a little longer than such a list might be for some other professions. Because the financial advisor is tasked with managing your money so that you will get the most out of it—this is why researching, interviewing, and finally hiring a good financial advisor is so important. Top financial advisors will have the characteristics covered above.