You finally want to get your financial affairs in order. Good for you. You’ve probably been aiming to for some time now. You also wisely realize that you can’t handle things by yourself, largely because there are so many specialized areas in your portfolio, from retirement to putting together a household budget.
You do need help. In fact, you need a financial advisor. But how can you make sure you get a quality one?
Here are some tips when you’re looking for good financial advice.
What is a Financial Advisor?
A financial advisor is a person is hired to provide clients with financial advice or guidance. Their services can run the gamut, from investment management to tax and estate planning. Increasingly, many advisors’ services have expanded to include portfolio management and insurance products, for instance.
Note that such advisors may work independently or with a financial firm. Moreover, each registered advisor must have a Series 65 license to do business with the public and must pass one or more exams. Depending on the services provided, several other licenses and certifications may be necessary.
How are Financial Advisors Paid?
Their compensation can be a fee, based on commission, or have a profit-percentage structure. Or pay can be some combination of these.
How Can I Find a Trustworthy Advisor?
Find an Actual Advocate
Guidelines are a bit vague when it comes to who can claim financial advisor status, so you need someone who advocates for you, not someone who has someone else’s interest at center. This can sometimes happen when, for example, an advisor is provided to you, at no cost, by a financial company, and there may be a conflict of interest. By contrast, a “fiduciary” is someone who has a legal or ethical relationship of trust with another party, particularly as it relates to money management. This person advocates on your behalf. So, the lesson here is to draw up a list of candidates rather than settle on the first person that appears on your radar.
Make Sure They’re Legitimate
We mentioned credentials earlier, and it is indeed important to check for them. A safe bet is to stick with a chartered financial analyst (CFA) or certified financial planner (CFP), since these people will be knowledgeable and will have passed at least one comprehensive examination and have agreed to comply with a code of ethics. You can go to the CFA Institute’s site or the CFP Board’s site to verify credentials.
The bottom line is that you want someone who specializes in your areas of interest or concern. For example, if your credit card obligations are out of control, what you could use is Freedom Debt Relief’s advice on credit card debt relief. After all, this is what these people do.
Determine how the Advisor is Compensated
We broached this issue above as well, and you do need to take care. For example, some so-called advisors are really in sales, even those who profess to be “independent.” So, ask candidates whether they get commission on insurance sales or stock transactions, and whether they’re affiliated with a financial entity that sells proprietary products.
Seek Advisors Who are Fee-only
A solid way to skirt the conflicts of interest that are so prevalent in the financial industry is to get an advisor who works and is paid exclusively by you and others of your ilk. Why? Because some financial solutions such as annuities often contain large sales commissions that are built into the price, a fact that is often obscured.
You also may want to consider charging a per-hour fee for service, since what you pay is not based on how much money you possess.
In summary, when looking for good financial advice, our overarching advice is to be patient and diligent to get someone who is the right fit for you.