It can be tough to choose a financial advisor that has your best interest in mind. Many financial firms reward financial advisors based on the amount of profit the company makes, not necessarily the amount of profit clients make. That doesn’t mean that all financial advisors are out to increase their employer’s bottom line. FreedomPlus recommends asking these questions to be sure you’re picking a financial advisor that won’t screw you over.
What licenses or other credentials do you have?
There are several different types of financial advisors and knowing their credentials can help you choose the best one for you, according to FreedomPlus. A certified financial planner, for example, has taken a comprehensive board examination to earn their designation. On the other hand, a Chartered Financial Consultant has studied the same curriculum, but hasn’t taken the exam. If you have a small business, you may need to hire a certified public accountant to help you with tax planning.
Do you have a specialty?
Some financial advisors work with a variety of clients, while others choose to narrow down on a particular niche. Not all financial situations are the same. Finding a financial advisor who specializes in financial situations similar to your can provide you with better results. For example, if you’re a single person with no spouse or dependents, you may look for a financial advisor with that specialty.
How do you approach investing?
This is an important question to ask, recommends FreedomPlus, because it gives you insight into the advisor’s investment philosophy. You can decide whether their approach resonates with you or if it’s better for you to choose an advisor that takes a different approach.
Do you work independently or with a team?
There are pros and cons to working directly with a specific advisor versus working with a team of advisors. It’s up to you to decide which approach you prefer, FreedomPlus recommends. If you’re working with an individual advisor, you’ll have more direct contact with that person, but it also means your advisor will be unreachable when they’re away from the office for a period of time. On the other hand, when you work with a team, you won’t see your advisor as much, but there will always be someone to answer whatever questions you have.
Does your firm receive any compensation for recommending certain investments?
Some firms are paid commissions, fees, or other benefits for recommending their products to the firm’s clients. This is a problem because you can’t be completely sure whether your advisor is recommending a product to you because it’s best for you or because they’ll get a kickback from the recommendation. If a firm receives any type of incentive for selling certain products to customers, it’s a sign you should walk away and choose another firm, FreedomPlus warns.
Do you offer any other services?
Some financial advisors only help with investments and that’s not necessarily a deal breaker unless you have other financial needs. Even if you don’t need the services at this particular stage in your life, you may need them for the future. Do you want a financial advisor with whom you can grow, who can handle your finances through all your life’s changes? Or would you prefer a financial advisor with a specialty that suits your needs right now? There’s no right or wrong answer. It’s up to you to decide what will work best for you.
Ultimately, you want to choose an advisor who will help you achieve your long-term financial goals. Asking all the right questions will help you narrow down your options to the financial advisor who will be best for you.