Finances are intimately woven into our lives. Choosing a financial advisor to guide you in your financial decisions can be a stressful process, but an important one. Having the right financial advisor on your team gives you peace of mind and can put you on a good financial path.
Whether you are looking for a financial advisor for the first time or you are looking for a new advisor, here are some key questions to ask:
1. How are you compensated?
Starting with this question is key to understanding the type of financial advisor you are working with. They should be able to answer the question quickly and with specifics. Are they receiving kickbacks for recommending certain investments? Do they have sales quotas to meet? Are they paid by salary or commission? Are they recommending the same investments to all of their clients? Why or why not? A planner who is paid by commission or sales versus a salary or hourly rate could have an incentive to steer you in a specific direction.
Ask for information about all of their fees and how much you will be paying per transaction, product and service. Also, ask about any additional fees you can expect from other services they offer. If the advisor is unwilling to answer or vague in their responses, consider looking elsewhere for a financial advisor.
2. What are your credentials?
Unlike other professionals, financial advisors are not required to earn a degree in their field. Credentials can show that the advisor takes his profession seriously. The most common credential to look for is CERTIFIED FINANCIAL PLANNERTM (CFP®). Working with a CFP® is an excellent place to start in your financial advisor search. CFP® professionals are required to act as fiduciaries, which mean they are obligated to place their client’s interest ahead of their own.
3. What makes you and your firm unique?
All advisors should be able to speak to their strengths and weaknesses. Asking them what sets them apart allows you to gauge how they handle client relationships, financial plans and investment strategies. Think about how their strengths align with your goals. Some firms may specialize in client relationships while others offer a technologically superior experience. If their specialties don’t match up with your values and goals, it is probably not going to be the right fit.
Taking time to ask the right questions in the beginning of your search can make all of the difference in your financial plan. Don’t be afraid to ask the right questions! After all, this is your financial well-being we are talking about.
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