In getting your finances straight, you may need a person who has more knowledge and experience than you do. That is why hiring a finance professional or advisor is very important. These people have spent years of study and experience in such field and have accumulated vast knowledge, tips, and tricks that can help you either get back on track financially or make your money’s pace faster and more efficient. Just like doctors when you get sick, you’ll need a financial advisor to help you out in your finances.
However, picking the right advisor for you isn’t that simple either. Since you’re dealing with your hard earned money, you want to have the best right? So here are some tips on how to find the right financial advisor for you.
1,) Find an advisor that suits your financial needs. Just like doctors, financial advisors have their own field of expertise. Generally, planners and advisors are divided into these groups: cash management, tax planning, goal setting, retirement planning, education planning, protections planning, and estate planning. Though all advisors have knowledge in each of these fields, they have an expertise on at least one of those. List down your needs and find out where do you need help the most and seek out advisors in that area.
2.) Check qualifications. Because of the broad field that the financial industry covers, financial advisors and planners are given titles according to their expertise. Registered Financial Planners (RFP) are planners that can give a general overview and assistance while other planners are labeled as specialists. There are Certified Estate Planners (CEP), Chartered Financial Consultant (ChFC), and Certified Financial Planner (CFP) just to name a few. Just like in any fields of study such as medicine and engineering, specialists are needed in order to provide expertise. Having such titles makes these financial advisors credible.
3.) Check track record. Check the advisor’s portfolio and try to see if he or she has done a great job consistently. Track record speaks a lot and in fact, it is more important than credentials and titles. If you happen to know a client of such advisor, check whether the advisor is doing a good job. Another way is to check the number of clients that a certain advisor have. If there are many clients, rest assured that such advisor is doing a good job.
4.) Assess what kind of clients does the advisor work with. This has something to do with the line of expertise a certain advisor have. When it comes to financial planning, education planning, retirement planning, and protection, advisors normally work with people from around 20 years of age to 40. Advisors who work with elderly people from at least 50 years of age above normally do more cash and financial management, while those that are working with people below 20 years of age do more financial management mentoring. Clients normally fall under three categories: accumulators, pre-retired, and retired. Accumulators are those who are still working and establishing their financial foundation, pre-retired are those people who have already saved up for their assets and will start to manage or put everything into place, while those who are retired are people who no longer work for money and may live on interest or passive income.
5.) Check the fees. This may sound a little evil but financial advisors are people who know how to make money work and they know how to make good excuses to charge you more. Since nobody works for free, financial advisors earn by helping you thus it is also your right to know first hand their service fee. Some advisors have a fixed amount of fee plus commissions on your investments if they will handle it while some either charge only one. The best way to see whether the fee is reasonable is first to ask several people who seek services of financial advisors and second, to shop around and see how much different advisors are charging their clients. A commission of at most 1% in investments are good enough and it may go up but not more than 2%. If you get an advisor who will only charge less than 1%, that is a good bargain but also don’t forget to check its credentials and track record.
6.) Check what companies is your advisor connected to. Free lance advisors are ideally the best because they have no biases towards different companies. If a certain advisor is connected to a certain company, there is a chance that such advisor will prefer that company over the other limiting your choices and may keep you from finding better companies. However, since most advisors are really connected to different companies, it would be logical to pick an advisor that is connected to numerous companies, not just one. The more, the better because it can at least somehow reduce the bias. There is no such thing as an everything-in-one in the financial industry thus you’ll need a series of options, not just a single product or a company.
7.) If possible, get at least 2 financial advisors. Two heads are better than one, three is better than two. Ideally, the more financial planners you get, you can make the better decision. Biases will always be there, advisors may have different views and solutions to your problems thus if you get more inputs, you can come up with the best decision or probably mix it up. Dealing with finances isn’t that difficult to comprehend, all you need is somebody to explain to you the basics, pros, and cons, and you’ll be on your way. Remember that advisors are only there to guide you and your decision will still matter in the end.