The right advice could mean the difference between comfortable retirement and financial distress. Your choice of financial advisor makes a significant difference as they help you make decisions appropriate to your circumstances. Seeking the advice of a professional gives you access to years of experience and knowledge. However, not all financial advisors are equal. Consider these questions when evaluating your current or potential financial advisor.
- Are they independent?
Independent financial advisors don’t work for any particular product provider and they do not earn any commission off the products they sell, while advisors who are tied to certain products may have incentives to sell. Independent financial advisors are most often objective and experienced. They help you lay out a path to reach your financial goals. Their expertise can help you make sense of the various products available and pick one that is best suited to your needs.
- What are their qualifications?
Financial advisors are legally required to hold appropriate licenses and pass regulatory exams. They are also required to prove on a continuous basis that they are maintaining and developing their professional competence.
Question prospective advisors about their academic and related credentials. Read all the disclosure documents they provide you with. These documents include information concerning which products the advisor is licensed to advise or offer recommendations on. It is important to verify that prospective advisors are suitably qualified to oversee your finances.
- What is their fee structure?
Advisors should offer full disclosure and transparency when considering their pay structure. Discuss all fees and relevant payment information upfront. Fees are generally charged as a percentage of the investment, which may include an initial fee and installments. Other fee structures exist, such as paying for advice directly (usually at an hourly rate). Make sure you fully understand the fee structure before you approve any payments.
- How can they help you grow your wealth?
The best financial advisors help you put a plan in motion, which compliments your needs and financial goals. They help you understand the impact your emotions have on your financial decisions, which allows you to invest with confidence and discipline. Responding emotionally can ruin the value of your savings. Good advisors look at your finances rationally and remain focused on your objectives, playing a pivotal role in generating wealth. Developing a relationship over time ensures that your plan evolves as your needs and goals change, rather than responding to short-term fluctuations.
Finding a good financial advisor
The most important aspect of this relationship is trust. Speak to someone you know and trust for a recommendation.