Now that you have decided to seek assistance from a professional financial planner, you might be at a loss on where to start. There is an infinite amount of information on the internet, which can feel intimidating and overwhelming. Simplifying the process with an investment advisor silences the noise so you can focus on what applies to your financial position and goals.
Here are a few tips to help you decide and know how to look for what you need.
Determine Which Type of Advisor You Need
Since anyone can put on the financial advisor title, it helps to narrow the field of who practices in the industry. Generally, there are three basic types of advisors. How they get paid determines in which category they operate.
Commission-based advisors usually sell insurance, annuities and mutual funds. They receive a percentage for each financial product they sell to clients. Similar to commission earners are a new category known as fee-based advisors. They have a license to sell insurance or investments and receive a commission.
Most industry experts recommend hiring a fee-only advisor. Generally, you can receive comprehensive services for managing your assets as well as assisting you with financial planning. These advisors make money from flat fees. Some charge hourly rates or a percentage of the assets being managed.
Check Credentials and Experience
When you are looking at different advisors, make note of their certifications and licenses. The gold standard in the financial services industry is the Certified Financial Planner. Obtaining these credentials requires taking extensive course work, passing an exam and having several years of related experience.
You will want to know how long a prospective advisor has been practicing. Real-life experience with different financial situations enhances education.
Follow Advice from an Ethically-Sound Advisor
Check with industry associations and databases to find out if an advisor has legal and/or ethical marks against them. Check for investigations, bankruptcies and criminal charges. Any negative information is a red flag for how they will handle your personal finances.
In addition, advisors must disclose any conflicts of interests and disciplinary actions.
Liking and trusting your financial advisor is critically important, most offer a free initial consultation. Use that time to learn more about their practice, work habits and philosophies.
Trusting your finances to another person is a major decision. Their qualifications matter just as much as their style of doing business. Shop around and stick with people who have fulfilled certification requirements while also upholding solid ethical standards.