Hiring a financial advisor is an excellent way to have your money managed responsibly. Managing your money can be tough, and with all the ins and outs of the trade, it’s often best to find someone who’s knowledgeable and experienced in such tasks. But finding a financial advisor isn’t easy, particularly if you don’t have a lot of time to put into this undertaking. Job one will be finding a financial advisor you can trust. Naturally, your search needs to end with someone who is educated and has the necessary expertise to properly manage your funds. Finally, you need to find someone who will communicate with you regularly and who is accessible when you need them. Here is a list of the most important things to look for in a financial advisor, compiled by top financial advisors who know of what they speak.
What type of financial advisor do you need?
First, an advisor who’s worth their weight will be able to help you assess your needs in order to come up with an overall picture as well as more in-depth assistance. However, it’s important for you to know your general needs in order to discern the type of advisor you’ll need. Just as with other professions, financial advisors come in many different levels of experience, specialty, and expertise. Ask yourself what you want out of your financial advisor and go from there. Do you need a CFP (Certified Financial Planner)? If you have a myriad of money management needs, including retirement, financial planning, employee benefits or pension, Social Security, estate planning, taxes, etc., you may need this level of help. CFP’s generally have extensive education (often upwards of a Bachelors) and must pass and maintain certification through continuing education. An RIA (Registered Investment Advisor) typically works with individuals whose net worth is over one million dollars. The fees for an RIA will be about 1% of that which is invested per year. Understand that there are many people these days who call themselves ‘financial advisors’ but whose education and experience is greatly limited. Be sure to check all credentials before allowing anyone to handle your money.
What do you know about their fee or commission arrangements?
Financial advisors typically work on a fee base, a commission base, or a combination of the two. Advisors who work for a financial company are referred to as brokers, and they often earn commissions. The advantage of going with one of these professionals is that you have the backing of the company, particularly if it’s a big-name in the financial industry. Fee-only advisors don’t work for commissions, and some experts believe this is the best type of arrangement because it involves less chance of ethics breaches. Those financial advisors who combine both fee arrangements many argue should be avoided if they pass themselves as being only fee-based advisors.
Do you have a trustworthy family member or friend with a trusted financial advisor?
Perhaps the best way to find a trusted financial advisor is through a trusted family member or friend, particularly one who is happy with their advisor. However, remember that many financial scams were perpetrated based on clients making a lot of money and referring friends or family members. It’s vital that you do a background check on every individual whom you hire to handle your money. It’s also important to interview them personally and get proof of their experience, education, and certifications. Remember: if it’s too good to be true, it usually is.
Financial advisors need to be professionals who understand and relate to the fact that you’ve worked very hard for every penny you’ve earned. They need to treat your money as they would treat their own. Unfortunately, recent experiences in the financial industry have shown that some financial advisors take this concept too literally. That’s why trustworthiness is the most important factor in the person who is managing your money. But how do you know the financial advisor you’ve chosen is, indeed, someone you can trust? The answer comes down to research. If you follow the tips above from top financial advisors when you need to find a financial advisor, your search will almost always land you on a money manager whom you can trust. For more information, consult with a top financial advisor in your area about how to manage your financial portfolio.