How do you find the advisor that is right for you? It can be a daunting task to find an advisor that has the best qualifications for your investment needs and that has integrity as well. Here are some questions you can ask the financial advisors you interview before you agree to let them advise you in money matters…
The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
So, you’ve decided you want to start investing, and you are interested in having a professional financial advisor guide you on your path to increased wealth.
How do you find the advisor that is right for you? Close your eyes and point to a name in the yellow pages? Ask your friends and family members who they use? Follow the lead of the ad on TV that says that their company has the “best” financial advisors?
It can be a daunting task to find an advisor that has the best qualifications for your investment needs and that has integrity as well.
It’s a good idea to interview several financial advisors before deciding which one will best work for you, and it’s okay to switch advisors too if you start working with one and things aren’t going as planned.
Here are some questions you can ask the financial advisors you interview before you agree to let them advise you in money matters.
Knowing the answers to these questions can help you determine which advisor may be right for you.
1. What Are Your Qualifications?
Different financial advisors have different qualifications and certifications which may or may not make them the best advisor for you.
The Financial Industry Regulatory Authority (FINRA for short) can help you determine what types of qualifications an advisor has with their easy-to-use search engine.
The search engine can help you verify that an advisor is who he or she says they are and has professional qualifications that serve to help them be better advisors.
2. How Do You Charge for Your Services?
Financial advisors typically charge in one of two ways: fee-based or fee-only
A fee-based advisor will get commissions off of the products he or she sells to you. Some products pay higher commissions than others.
A fee-only advisor charges a flat annual fee to manage your wealth. There are no commissions paid based on products they recommend.
Many experts agree that a fee-only advisor has more incentive to act in their clients’ best interests, as there are no commissions at stake that may sway their investment recommendations, but that is a decision only you can make.
3. What Types of Clients Do You Typically Serve?
Experts often recommend searching for an advisor that has a client list with a variety of different financial scenarios.
For instance, if you are a beginner investor, you’ll want your advisor to have at least some clients that are just starting out in the investment world.
If an advisor generally only focuses on $1 million-plus clients, you as a beginner investor with very little to start investing with might not be a good fit for someone who is used to dealing only with high-stakes investors.
Adversely, if you are a multi-millionaire interviewing an advisor who has never managed a wealthy client, you may want to move on to find an advisor who has experience managing larger monetary investments.
4. What Services Will I Be Provided if I Choose You?
It’s important to know what exactly you’ll be getting for the money you’ll pay a financial advisor. Does his or her annual fee include face-to-face meetings? Monthly phone calls? How much extra will they charge for individual stock purchases or sells?
Find out what an advisor will do for you for the money you will be paying them so you know that you are getting what you expect to get with your advisor.
5. How Much Contact Do You Have With Your Clients?
Some advisors are very hands-off. Others are more hands-on when it comes to their clients’ investments.
Which do you prefer? Do you want a “set-it-and-forget-it” approach or an interactive relationship with an advisor who updates you regularly on your portfolio performance and on additional investment opportunities?
6. What Is Your Investment Approach?
You will want to have an advisor who is respectful of – and familiar with – your preferred investment approach.
For example, if you are a risk-adverse client who likes to stay with tried-and-true investments such as index funds, you’ll want to be sure your advisor has experience in that area.
7. How Will You Determine What the Right Investment Approach is for Me?
A good financial advisor will do a thorough interview with new clients to help determine the right investment strategy for each client.
They’ll also be respectful of the client’s wishes and preferences. Be sure your prospective financial advisor is willing to partner with you regarding your investment portfolio instead of working to make you think like they do.
8. Can I Have Some References?
Any financial advisor worth hiring will be happy to give you names and contact information for clients you can contact as a reference.
If an advisor refuses to give you references, move on.
Conclusions
A great financial advisor can help you build your wealth portfolio from good to great, or from nothing to something big.
Be sure to do thorough research before choosing an advisor to help you invest and grow your wealth. A good partnership with a properly educated financial advisor can increase your chances of growing your net worth.
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