If you’re not sure what to do with your own investment portfolio, hiring a financial advisor can help you sleep more easily at night.
To find the right financial advisor for you, it is important to interview several financial advisors and ask the right questions. Here are the top 7 questions to ask before choosing a financial advisor.
Do you put my interests first?
If a financial advisor is a fiduciary, they adhere to standards to work in your best interest. For example, financial advisors who have earned the Certified Financial Planner (CFP) designation agree to always act in the best interests of their client.
The term fiduciary is often used on websites, but what does it mean and how can you be sure the advisor is adhering to a fiduciary’s standards? The fiduciary standard expressly states that advisors who adhere to it are legally obligated to put the needs of their clients first.
Ryan Firth, the founder of Mercer Street Financial, says you should ask direct questions about an advisor’s priorities, such as:
Will you and your company always act in my best interest? If so, how?
Give me some examples of how you put your client’s interests ahead of your own?
In plain English, how do you mitigate potential conflicts of interest between what’s best for your customers and what’s best for you or your business?
Another role of a fiduciary is to mitigate any conflicts of interest or be transparent. A counselor is essential as conflicts of interest can affect the quality of the work the consultant can deliver and cause undue stress.
So how do you ensure that you choose a counselor who puts your needs first and upholds the standards required of them? You can use the Broker Check feature on the FINRA site to check the background of the advisor you are considering, or you can choose an advisor who has earned their CFP title.
How do you get paid?
Consultant fees and fees can be a frustrating gray area if you’re not careful. Many financial advisors do not disclose their fees on their websites. There are many ways that financial advisors are paid, and they have to be honest about those fees and what you have to pay.
Here are a few different ways that a financial advisor can be compensated.
Fixed costs
A fixed (or fixed) rate is a predetermined price for a particular service. For example, a financial advisor may charge $3,000 for the one-time creation of a financial plan.
Hourly rate
An hourly rate is a simple rate that outlines the hourly wage for the financial advisor.
Assets under management
Advisors who charge this annual fee take a percentage of your investments. An AUM fee is charged as advisors are compensated for managing their clients’ investments.
committees
Financial advisors may receive commissions on products they recommend to you, such as mutual funds and annuities. Make sure your advisor is transparent with you about which of the products they advertise are on a commission basis.
Consultants may also use a different fee structure, depending on the services provided.
What services do you provide?
Before you decide to hire, it is essential to understand what specific services you need to perform.
You don’t want to waste your time on someone who is not an expert in the service you are looking for.
Stephanie McCullough, founder and CEO of Sofia Financial, encourages people to ask a consultant about their expertise. “The most critical question to ask a consultant is whether they provide the service you need,” McCullough says. “If you need investment management, cash flow strategies, or retirement savings planning, make sure you talk to advisors who specialize in those services.”
Financial advisors typically offer a wide range of services. These services often include:
Education Savings Tax Reduction OpportunitiesCash Flow StrategiesLoving GiftsRetirement Planning Business Succession OptionsTrust and State ConsiderationsInsurance Protection Comprehensive Wealth Management ServicesPortfolio Management
Choose someone who can meet your current and future needs, as your finances are likely to evolve throughout your life.
What is your investment philosophy?
A good financial advisor will dig deep into your investment needs (and ask you questions) before recommending products or services to you.
You want an advisor who makes the effort to understand the full scope of your needs and who will align with your goals. Their investment advice should also reflect this philosophy.
Ask your advisor whether they have a preference for one particular investment style or type of investment. The ideal advisor should not take a one-size-fits-all approach, as some investment styles may work well for some individuals, but not so well for others.
What experience do you have?
There are pros and cons to working with financial advisors who are new to the field. They are probably more enthusiastic about their work and more committed. They may also have the resources of a reputable company to back them up, which could work well for you.
However, they have not been tested yet and if they have no previous consulting experience, it may be better to seek out someone more experienced in the field.
Always look at an advisor’s career history to see if they have other financial experience or certifications that can help you.
Choose an advisor that fits your needs and values
There are many different factors to consider when choosing a financial advisor. Make your choice with your needs and values at the forefront of the decision-making process.
Look for an advisor who is transparent about what he has to offer and someone who thinks along and puts your needs and interests first. It is critical to find a financial advisor who will develop personalized strategies for you as your finances evolve throughout your life.
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About the author
Max Marvelous
As a Certified Credit Counselor, Max has coached more than 250 millennials to take the stress out of money. After coaching, clients are stress-free about money and have a simple plan that they can follow to achieve their goals. When Max is not coaching, he reads finance books, indoor cycling or visits local pawnshops in search of Swiss watches. Website
This post Frequently asked questions to a financial advisor
was original published at “https://wealthtender.com/insights/financial-planning/questions-to-ask-a-financial-advisor/”
