We all need help, especially with issues related to our finances. Even if you’re fairly knowledgeable about finances and investing, it can be beneficial to hire a financial advisor.
But where do you start, and how do you know they have your best interests at heart? A good financial advisor can help you find solutions to your individual issues, and help you reach your goals — you just have to ask the right questions.
When choosing a financial advisor, though, you don’t want just anybody.
No one’s going to take care of you like you will, but it does help to have an advisor who understands your needs and goals, and will do his or her best for you.
Start by asking for referrals from friends and family. Make sure you get suggestions from those whose own goals and needs are similar to yours.
You can even get information from the National Association of Personal Financial Advisors for some helpful information on qualified advisors in your area. Don’t forget to use FINRA’s BrokerCheck to find out whether or not the advisors you’re considering, have had any disciplinary actions taken against them.
Narrow down your list to a few financial advisors, and then ask the following questions:
- What are your annual fees? Look for an advisor that charges a reasonable fee. You don’t have to go with the cheapest advisor, but you can get a feel for what the “middle of the road” or “reasonable” is as you talk with potential advisors.
- What are your credentials/certifications? Find out what designations the financial advisor has, from MBA to CPA to CFP. Also research special certifications, such as in the area of tax planning or small business. You want an advisor that understands your needs and will fit your specific situation.
- What is your investment philosophy? Find out how each advisor chooses to trade. Does he or she like actively managed funds? What kind of portfolio management theory is important to the advisor? How often does he or she recommend that you trade? You’ll have better results if your advisor is compatible with your own investing views.
- What funds do you recommend? What compensation do you receive? Get a feel for the types of recommendations the financial advisor makes so that you get an idea of how your portfolio will be managed. But don’t forget to find out if your advisor is being compensated for putting you in those funds. Be wary of an advisor who is paid to put you in certain investments, rather than just being paid by you.
- Are you a fiduciary? Find out if the advisor has a fiduciary responsibility to clients. This means that he or she is required by law to act in your best interest. In many cases, that extra protection can be a big help to you.
- How long have you been doing this? The more experience a financial advisor has, the better in most cases. However, if you have a lower-end portfolio, you might not be able to afford someone with 10 to 15 years of experience. Try to get the most experience possible for your buck.
- What other services do you offer? If you are looking for an all-in-one financial advisor, find out if there are other services offered by the advisor, or the advisor’s firm. This can include tax planning, wills, trusts, and other items that might be of interest to you.
Once you have a feel for the situation, and what each financial advisor has to offer, you can make a choice that fits you best.
What questions do you ask a potential financial advisor?