There is no problem is searching for a financial advisor. It’s much more challenging to select the right person who will be well-qualified to help you overcome any financial difficulties. A financial advisor is a person in charge of helping people to manage their money, make the best investment decisions, and pursue their financial aims.
However, there are several types of professional advisors, and each financial planner has its own peculiarities. There is no one-size-fits-all so you need to take into consideration the following tips and questions to ask a prospective certified financial planner.
How to Choose a Financial Advisor
There are certain factors you need to take into account before you select the right financial advisor companies. The first step in the financial planning process is to understand your needs and what exactly you are looking for. Then it will be easier for you to pick the most suitable company or individual advisor without having to pay a lot.
#1 Decide What Services You Want
In case you just want to hear a professional answer to your question about choosing the best investment or managing your finances, then it may be worth choosing personal financial planning in the form of a Robo-advisor. A financial planning app is a cheapest and streamlined option for beginners.
Online financial planning services or individual advisors may be the best choice for clients who have a difficult financial situation or need a thorough analysis and advice on their insurance needs, estate problems, etc. Clients who don’t mind working online and would like to save money may turn to online financial planning companies.
Remember that financial advisor reviews can be beneficial and help you pick the right option for your situation. There is nothing wrong to start with online financial advisor websites or free financial planning software and upgrade to individual advisors as your financial problems or needs change.
#2 Consider the Costs and Fees
Before you decide to commit to a certain advisor or service you need to have a deep understanding of their fees and costs. There are three levels of fees you will most likely find. Robo-advisors offer personal financial advice for an annual fee which is taken from your account balance. They begin at 0.25% of the assets.
For instance, 0.25% on a $60,000 account balance will work out to $150 per year. Online companies providing financial planning processes and expert help are usually certified and charge a particular flat fee. Financial planner vs. financial advisor means almost the same. Traditional individual planners or advisors charge a median fee of 1% or higher while some planners charge an hourly rate as well.
#3 Check Their Qualifications
Everybody wants to know how to pick a financial advisor that will be worth paying money to. The last but not least tip to find the best financial expert is to check out their standards and qualifications. Look for reviews and feedback of previous clients, conflicts of interest, their pricing policy as well as previous disciplinary actions.
How to Find a Good Financial Advisor
What is a financial advisor? How to find a financial advisor? Many people want some expert help with managing their finances and they would like to know if financial specialists can help them avoid financial issues. What does a financial advisor do?
They typically advise people on how best to invest and save their money. Sometimes their financial advice may include estate or retirement planning. It all depends on the client’s needs. The best option to select the right personal financial advisor is to opt for a certified one. A certified fee-only financial planner means you can trust them.
Advice to Choose Financial Advisor
- Ask Friends or Colleagues – One of the first things you may do when you start searching for a free financial advisor is to ask your relatives and colleagues if they know somebody they can recommend. Even if you’ve just graduated and haven’t found a steady job yet, you may always turn to your fellow students and friends. The best option will be to find a fiduciary financial advisor who has enough experience helping clients with the same problems as you.
- Check NAPFA – The National Association of Personal Financial Advisors (NAPFA) can be another great solution to find the right certified financial advisor. Pay attention that every independent financial advisor from this association has income only from their clients. It means you will be obliged to pay a fee for their services. The advantage is that their aim is to meet your requirements and help you solve your financial problems so they have no commissions. So, this option for your financial planning can be really useful.
- Garrett Planning Network – this financial planning software presents a database of top financial advisor firms and individual planners who work on an hourly basis with a set fee. Every independent financial planner available in this network is certified and well-qualified to provide expert help in financial matters. This option works best for people who just want to get answers to their questions and want to save money.
Questions to Ask a Financial Advisor
If you decide that you feel the need to turn to a human advisor instead of a financial planning calculator, here are some questions to ask your financial advisor in order to understand that your decision is right.
Q1. How Old Are You?
What questions to ask a financial advisor before hiring? If you’ve just graduated recently and want to have a clear start of your adult life and make a financial plan for the upcoming years, you may opt for an older planner who has vast work experience. On the other hand, if you are older, you can look for a younger planner with fresh ideas.
Q2. How Long Have You Been Working as an Advisor?
This should be one of the top questions for a financial advisor. Work experience is really important. Some people may opt for free financial planning. But those who want to have visible results usually search for an experienced professional.
Q3. What Is Your Education?
Insurance agents, business associates, brokers, hairdressers, and friends don’t know how to make a financial plan. One of the questions to ask a financial planner is about their educational background. It’s better to search for a Registered Investor Advisor (RIA) or a Certified Financial Planner (CFP).
Q4. Are You a Fiduciary?
What questions to ask a financial advisor who seems to have enough work experience and educational background? Go ahead and ask if they are a fiduciary. Such specialists work according to your personal needs and in the best interest of each client. Ask a potential planner if they follow this standard or just recommend things that might not be the best solution for you.
Q5. How Do You Get Paid?
According to the best financial planning books and guides, there are several types of advisors depending on how they get paid. Those who charge a set fee are the best option in most cases as they won’t recommend you different products for which they get commissions.
If you want to get the best financial advice, opt for fee-only planners who charge around 1% of your investments annually. Other planners may charge an hourly fee or a flat fee. If you want to save money, you may start with a financial planning worksheet and a Robo-advisor.
Q6. What Services Do You Or Your Firm Perform?
What to ask a financial advisor who owns a firm? Ask them to describe what exactly they do. The same question may be asked to an individual financial planner. Your aim is to find out what kind of company they work for, what is a financial plan, and what type of clients they have. Also, their services should include:
- managing securities;
- retirement planning;
- tax planning;
- estate planning;
- long-term care advice.
Q7. What Kind of Portfolio Do You Manage?
Certain financial planners may only be looking for the high-net-worth customers which may be too much for you. So, ask about the type of portfolio they manage, whether it is the smallest, average or largest.
Q8. Can You Give Me Any References?
Another significant step is to ask a potential financial advisor to give you a few phone numbers and names of their clients as references. This may be helpful and let you find out more about a particular advisor and how they work. Ask previous clients how long they have known this person, how they have found them and whether they are satisfied with their services.
Q9. How Much Access Will Be Allowed?
Ask how your mutual relationship will work and what schedule will work best in your case. Maybe the advisor will be available for extra emails or phone calls outside your main appointments. This way you will be able to stay in touch in case of an emergency.
Q10. How Often Will You Give Me an Updated Forecast?
Ideally, the answer to this question should be yearly. Pay attention to what the advisor replies and draw the conclusion about whether you need their services.
All in all, nearly everybody can benefit from cooperating with an experienced financial advisor. Follow these tips to find the best option for you and make it a strong investment in your stable financial future.