Choosing a Financial Advisor:
Looking for a financial advisor is tough when you don’t know how to assess the quality of your potential hire. After all, if you were an expert in the industry, you wouldn’t need to hire them. So how do you find someone that fits what you are looking for? You can ask the right questions and look for the right answers. Here are the cardinal questions to pose before you finalise any working agreement.
Are you registered as an advisor?
What you want is for your advisor to answer yes. If they are, then they are bound by certain industry rules – such as needing to put your financial needs first. If they are not registered, or not a fiduciary to use the official term, then they don’t have to at all. Instead they have to go by suitability, which means finding something which is appropriate to your needs but not necessarily in your best interests. Basically, you want the highest possible guarantee that they will be trying to help you make and save money, which means you want them registered.
What are your fees?
This should be a no-brainer, but be aware that there could be some hidden fees you are not aware of at the outset. You might get fees charged on a certain rate, or you might have to pay fees based on a percentage of the value of your portfolio. This is called Assets Under Management, so watch out for that term cropping up. You might also be charged a commission per transaction. Just because you are told up front about one charge, don’t assume the others aren’t included also.
How experienced are you?
Find out how long your advisor has been working in the industry, and whether they have worked with people in your situation in the past. You can also find out what qualifications and licenses they hold. This will give you some idea of their ability, but of course it is no guarantee.
What style of planning and investing do you encourage?
Some investors will have a more aggressive approach, while others will be more cautious. You need to know that they will suit you and help you to develop in the way that you prefer. Some will look at the big picture, while others will focus on smaller areas to bring everything up to scratch. Some investors are best at making money when the market is good. Others are best at saving money when the market is down. You can also find out whether the financial advisor you are dealing with is in charge of making investment decisions, or whether others in their firm would be making those choices. If you want to get an idea of the style of your advisor in real-world situations, ask them how they advised their clients during recent times. You could choose the 2008 recession, for example, or the lead up to the Brexit vote. If you like their advice, they could be a good fit for future events too.
While all of these questions are a great way to assess your advisor, you can also rely on your own gut feeling. It could be that they answer all of the questions with the responses that you were looking for. If you still don’t feel right or that you like them as a person, you can still walk away. In fact, you should. You need to trust your advisor to give you the right advice and make the right moves. You can’t do that if you aren’t comfortable with them.
Samantha Harris is a financial blogger working at Market Matters – professional traders and financial experts. Samantha is passionate about ever-fluctuating stock market and believes that financial knowledge is of prime important to everybody who wants to have a calm and safe life.