Appointment of a financial advisor can be a headache, especially when you do not know about the process of inspecting an investment advisor. Thus, it is better to learn the characteristics which will help you in choosing a person capable of managing your finances.
Determine their type
Before looking out for a financial advisor, you must decide a type that is perfect for your needs.
Fee-based advisor– Such advisors are quite new to the world of finance. They are in touch with an agent or a broker and have a license to sell insurance or investments for a commission. Such advisors provide the service of financial planning for free, yet they demand a fee for their services.
Commission based advisor– As the name suggests, these brokers sell financial products in return for a commission. They are normally employed by major firms, and their recommendations are often derived from the temptation of commission. Their recommendations may depend on who pays them better.
Fee-only advisor– In case you are an individual looking for financial guidance, then we would recommend this type of financial planner. Such advisors are not driven by the aim of making more money through commissions as they are paid predefined fees on an hourly basis.
Determine your needs
You must acknowledge the extent of the financial help you need. In relation to this aspect, there are three choices:
All-inclusive financial planning– The strategy is preferred for comprehensive outlining of all your moves to achieve a long term goal. Normally, advisors charge a flat fee for strategizing your education, insurance, investments, and retirement.
Hourly consultation– If you want to know the answers for specific financial questions, then you must go for hourly consultation. In this way, all your queries will be resolved in less time, effort, and for less money.
Asset management– Such a professional will be your financial partner throughout your life or till the time you have fixed the contract. They will take care of your investments and manage your assets with changes in your expectations and life situations.
Look out for these qualities
Even though an advisor can have many certificates and licenses like CFA, CFP, ChFC, and CPA, yet CFP is considered the gold standard for any advisor. Nonetheless, you should also judge an advisor over their ethical background like criminal charges, bankruptcies, investigations, etc. Remember, an advisor must acknowledge their professional history on part 2 of ADV.
Moreover, you should pick an advisor with a satisfactory experience. It is good to go for an advisor with a good educational background who is new to the field. However, an experienced planner would be better in handling real-life financial situations.
Also, judge an advisor over their eagerness to sell you a product or earn more money. Such people will work for their best interest and will not hesitate in selling you unwanted products and guide you towards unnecessary investment platforms.
Apart from their experience, knowledge, and resolve every advisor has their philosophy, ideal, and gaols. Make sure you partner with someone who relates to your financial thinking. Patience will be your biggest virtue in choosing an advisor.
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