DIRECTION CHOOSING A FINANCIAL ADVISOR

Hiring a financial advisor is no small decision, and not one to be taken lightly. Finding an advisor who truly puts your interests first can provide tremendous value, but choosing the wrong person can put your financial future at risk.

Before you meet with a financial professional, take the time to compile some important questions. Getting answers to key questions should be a major part of the interview process for every financial advisor you consider. How the advisor answers your questions should play a large part in deciding whether to entrust him or her with your hardearned wealth.

How are you compensated?

This is one of the most important questions you can ask. Fee-only financial advisors are compensated solely by their clients (that’s you). They derive no income from the investments they recommend, and they get no commission when you purchase a particular investment. On the other hand, commission-based financial advisors derive their income from the investments they buy or sell. Some advisors combine elements of fee-only advisors with elements of commission-based advisors, depending on the needs of the client.

Ultimately, it is not the method of compensation that is most important, but rather that you understand how you are paying. Before deciding to work with an advisor, make sure you know what his or her services are going to cost you and that everything is explained clearly to you.

What experience do you have?

The financial advisor you choose will need to help you make vital financial decisions in good times and bad. An advisor who has never managed money through difficult times, or who has never helped someone with circumstances similar to your own, may be ill equipped to assist in the way you need. Make sure the advisor you select has a level of experience about which you can feel confident. You should also do some research into the background and education of your potential financial advisor since both can have a profound impact on the quality of advice and the level of service you receive.

What services do you provide?

When you first seek out the help of a financial advisor, you might be looking strictly for investment advice and guidance. But as your financial needs becomes more complex, you might need a more comprehensive set of services. Choosing a financial advisor who works closely with reputable accountants and attorneys to provide tax advice and estate-planning services can be very beneficial. Furthermore, we recommend selecting an advisor who is committed to educating you through free workshops, conference calls, newsletters, and other events.

You should also be aware that some insurance agents present themselves as financial advisors, though they do not actually hold the necessary licenses to sell investments. In such cases, they may pressure you to purchase a product they are allowed to sell rather than the one that is best for your circumstances.

Are you properly licensed by the federal and state government?

Financial advisors need to register with a variety of state and Federal agencies, so it is important to check the registration status of every financial advisor you interview. Each state has a different set of licensing laws and disclosure requirements, so you will need to check the requirements in your own state and make sure the fi is properly registered and licensed.

You will also need to make sure there are no outstanding complaints or charges against the firm. Each state keeps its own database of disciplinary actions against fi and checking that database is essential as you shop for a financial advisor.

Working with a fi two-way street, and it’s important to ensure that you are comfortable and your needs are being met. It is critical that your questions are taken seriously; a trusted professional will take time to answer each question and put you at ease. Feel free to add your own and never be afraid to ask too many questions.

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