Financial advisors are trusted professionals who provide advice about money and investing. Working with a financial advisor can help you reach your goals faster and reduce the risk of failure. Financial advisors don’t come cheap, though. You will likely have to spend some money on their services. But it’s worth it to see a long-term benefit from working with one. So, before hiring a financial advisor, there are specific questions that you need to ask when looking for a financial advisor before finalizing your decision:
Ask what services they offer.
Ask your potential advisor what services they offer and whether they are a good fit for you. There are several different financial advisory services out there, such as investing, retirement planning, tax planning, budgeting, etc. Depending on your needs, some advisors may be a better fit than others. For example, if you’re starting out and don’t have much to invest, you may want to work with an advisor who focuses on budgeting and savings. On the other hand, if you’re nearing retirement and are trying to figure out how to maximize the value of your savings, you may want to work with an advisor who specializes in retirement planning.
What accreditations do they have?
When looking for a financial advisor, you should check to see if they have any financial certifications. For example, the Securities and Exchange Commission (SEC) requires anyone who sells investments to have a “Series 65” license. This means they have passed a rigorous test and have a certain level of expertise in financial products. Other financial certifications to look for include the Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Registered Investment Advisor (RIA), and Certified Financial Counselor (CFC). These certifications, along with a gips verification, are a good sign that your potential advisor has the experience and education necessary to provide valuable financial advice.
How do they charge for their services?
How your potential advisor charges for their services is an important consideration. You should know, upfront, how they will be compensated for their time and advice. For example, you may want to work with an investment advisor who charges based on assets under management (AUM). However, this advisor may try to push specific investments that promise a high commission. In other words, they may recommend the most profitable investments for them, not for you. On the other hand, an advisor who charges based on the value they bring to your portfolio is more likely to make recommendations based on your best interests, not theirs.
Do they have references from previous or current clients?
An excellent way to figure out whether a financial advisor is right for you is to talk to their current and former clients. You can ask them questions like, “How did you decide to work with this advisor?” or “Why did you choose to work with them?” Any advisor worth their salt should be more than happy to provide you with references. If they don’t offer any or seem hesitant, that should be a red flag. There’s a good chance that something is fishy. If you can, try contacting a few of these references and asking them about their experience working with the advisor.
Conclusion
It’s worth repeating that hiring a financial advisor is not a decision to be taken lightly. Because they will be managing your money, you need to make sure you find someone who is trustworthy and competent. You may have to interview a few financial advisors to find the right one. And that’s okay. As long as you follow the tips outlined above, you should be able to quickly identify the right person to help you reach your financial goals.