Choosing an Advisor
Finding the Right Financial Advisor For You
by Chris Parry (Write for us!)
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Swimming in the predator-infested ocean of finances can be a difficult prospect. Without a college degree in
investments, making
the right decisions for your future can be downright scary at times. Because so few of the
intelligent people around you truly have a grasp of the concepts in the financial world, it is sometimes necessary
to consult a financial advisor. Finding the right advisor to meet your needs, though, can be as cumbersome as
trying to navigate the path yourself.
What Does A Qualified Financial Advisor Do?
The key is finding the right person to help you first understand what a financial professional is supposed to do.
Most people in the industry will tell you that a good financial advisor is there to talk to you about any aspect
of your current and future financial situation. He or she should help you with concepts like insurance, wills, trusts,
taxes, and retirement plans as well as your general investments. A good financial advisor works only within these
fields, thereby giving him or her the specialized knowledge that comes from being a day-to-day professional in
such a complicated industry. This could give you, as the consumer, access to that information as well as some
measure of expertise when you begin to make your financial decisions. As a result, a financial advisor can help
you make a comprehensive plan for your future that includes both the goals themselves and how to reach those goals.
If anything about your situation changes, your financial advisor should help you update your plan.
Types of Financial Advisors
When you begin your search for a financial professional, you must be aware of the fact that there are two
major kinds of financial advisors
in the industry: independent advisors (also called Fee Only or Fee Based Advisors) and those
who work for a particular company.
- Independent Advisors: These advisors charge a flat, per hour rate for their services. Unlike traditional brokerage
based advisors, they do not profit from commissions. Often, a fee only advisor will not limit his or her advice to
the general nature of your specific investments, though some firms do focus only on investments. Many in
the industry think that selecting these kinds of advisors may be a better decision as all of their advice
is objective in nature, and they,seemingly, have the entire world of stocks, bonds, and mutual funds etc. open
to them because they have no incentive to suggest one investment over the other.
- Company Based Advisors: These are the most traditional type of financial advisors you will find on the market
today. Many of them work for big companies like Merrill Lynch or Edward Jones, and their income is often
based solely on the commissions they make from your trades. Brokerage based advisors are more likely to
look at your portfolio as a whole and offer you investment-only advice, instead of helping you with the
overall financial planning process.
Some Things To Look For In Your Next Financial Advisor
Once you understand which type of financial advisor might be best suited to your needs, you are ready
to start shopping for someone to handle your transactions and give you the kind of advice you truly need. It's
hard to just open the yellow pages, though, and select an advisor based only on a name and a picture. There are
several things you should pay attention to as you shop for
advisors.
- Qualifications: This is one of the most important categories when you are shopping for an advisor. At
the very minimum, your next financial advisor should have a financial planning certificate. There are, though,
other levels of certification a financial advisor can attain, and (at least in theory), the higher the level of
certification they have attained, the better off your financial portfolio will be. Some of the other certification
levels you might encounter are Advanced Financial Planning Certificate (AFPC), Associate of the Society of
Financial Advisors (ASFA), and Certified Financial Planner (CFP). In the investment world, a good financial
advisor will probably also hold an Investment Management Certificate. The Financial Services Authority
regulates advisors, and you can learn about certified advisors on their website.
- Services: Before you even begin the shopping process, you must seriously consider the kinds of things
you want your advisor to help you with. Some advisors focus on specific areas, while others run a full
service shop, so even though you may have already considered whether you want an independent advisor or
one who is company based, you still need to make sure the firm you are considering will provide for all your needs.
- References: Be sure to go with a financial advisor who can offer you the names of some satisfied
clients. It's also a good idea to make sure he or she can offer you references from other industry
professionals too. While this doesn't ensure your happiness and success with your new advisor, it
can certainly put your mind at ease.
The Interview
Once you've narrowed down your selection list a bit, it's time to start interviewing your top
five candidates. This will help to give you a better idea of about whether you are getting a professional
you feel comfortable with. Here are a few areas that you might want to touch on during an interview.
- Find out how long the financial planner you are speaking with has been in business. While a novice might
be a good bet for the fresh ideas they will bring to the table, there are also
numerous benefits to hiring a
seasoned professional.
- Be sure to ask about work experience related to financial planning. Just because someone has been a
part of the financial industry doesn't mean he or she has truly advised any individual clients, and that, in
and of itself, can be a potential red flag .
- Ask about investment and planning philosophies. While you may or may not be the typical client that
the advisor usually deal with, you can at least get an idea of how he or she will operate.
- Be sure to find out about contracts, fees, and commissions. You need to understand any hidden costs
before you start working with your new advisor.
Making the Right Selection
If you ever feel uncomfortable with one of your candidates, it's a good idea to leave immediately. You don't
need to be talked into hiring an advisor you don't like. While financial planning might seem a bit overwhelming,
choosing the right advisor can help. These tips should be used as a guide to the world of financial advisors.
Choose wisely, and your financial future will benefit.
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