There is a sea of financial advisors available on the market. The problem is that it can be extremely difficult to find a financial advisor who is actually worth their salt.
One of the biggest problems that smear this profession is the fact that almost anyone can brand themselves as an advisor despite having very little knowledge this specific finance realm. Therefore, it is quintessential that you make sure that you are extremely meticulous and thorough when you choose a financial advisor or planner, as getting poor financial advice could spell disaster in your immediate future.
Mentioned below is a list of some essentials that you should always look for in a good financial advisor.
This one is a no-brainer. The first thing you should look for in any financial advisor is their certification (s). This will prove the legitimacy of their profession and give you an idea of how much knowledge the advisor has in the field of personal finance. The more certifications an advisor has, the more knowledge they probably have.
You shouldn’t just look at the number of certificates and the schools the advisor has attended. Take some time to find out the criteria that receiving the certification warranted. Also, look for the initial and ongoing requirements to attain and maintain their designation.
It is important that you review the experience and educational background of your prospective advisor with great care. Take your time to learn why the potential advisor would be most suited to help you take control of your financial situation.
Going to fancy schools is not enough; you should also see that the advisor is efficiently able to apply their knowledge to form a bulletproof financial strategy for you.
Looking at the articles and website of the advisor gives you a deeper look into his thought process, planning, qualifications and background. You can also go through detailed information on many independent financial advisers through the Securities and Exchange Commission (SEC).
It would be advisable to find out how your potential advisor receives compensation for his or her services. Look at the pricing models that these advisers have to offer. Following are the three main pricing models that most well reputed advisors follow.
1. Assets under management
2. Flat/Fixed fee
3. Hourly fee
According to numerous studies, the general rate of advisory fees is 2.00%
4. Working Relationship
It is important to find out who you will be interacting with before signing on. Many financial planners barely show up and only check in once or twice a year. This is simply not enough. Make sure that you hire an advisor who is available when you need him or her and is aware of your financial situation.
While good service level and meeting cadence matter a lot, transparency is something that is equally important, if not more. Always look for advisors who make things easier for you rather than letting you know that you will not be able to handle your financials without them.
A great sign of good financial advisers is that they often tell their customers that they will once again be able to take charge of their financials.
6. Standard of Care
Good financial advisors always do what’s right for you and not necessarily what’s best for you. Moreover, financial advisors might gain status of being a fiduciary in the near future. However, it will not be universal and be present in only some selected aspects of the relationship with their client.
To determine the highest standard of care, you should see if the adviser acts as a fiduciary capacity in every area of the association.
7. Clean Record
You should always check if the prospective advisor has had any run-ins with legal regulators. A clean record is a clear indicator of the professionalism of an advisor. They should be well disciplined and be able to maintain professionalism at all times.
Once you finish interviewing the advisor, you should always ask him for a couple of references. Make sure that the references are existing clients as there is a high probability that old clients maybe fake if the advisor has a shady track record.
Hire an advisor who has at least a decade of experience in the field. Dealing with numerous clients over a long period makes the advisors well equipped to face difficult and demanding challenges with ease.
10. Sample Plans
Good financial advisors always carry samples of their financial plans to show their clients. These plans are a way to convince and satisfy the client. Make sure that the plans that an adviser provides are comprehensible. You should also ask the advisor to show you a rough demonstration of how he will back up his plans.
What else do you think are good things to look for when selecting a financial advisor or planner?? If you want to increase your financial knowledge, check out these great finance books!
Certified Public Accountant, Masters of Business Administration, Masters of Science in Accounting, Chartered Global Management Accountant, Family Man