How do you select a financial advisor
Financial advisors are professionals who have a firm grip on the pulse of various market demands, risks, and predictions so as to suitably advice you in all matters money related. The best financial advisor one who assists you in setting and achieving your financial goals in a way that suits your needs and budget. But certain points need to be taken into consideration while hiring a financial advisor. Here are some points which will help you in selecting one you can depend on.
What are the types of financial advisors and the planners?
- Accountant: Accountants help you by advising on tax matters and help you prepare and submit your tax returns to the Internal Revenue Service (IRS).
- Attorney: A very small percentage of attorneys provides financial planning services, usually specializing in estate and tax planning. An attorney may be needed while preparing the necessary legal documents for execution of suggestions in areas which includes a will, trust documents or business ownership planning.
- Estate Planner: Estate planners provide you with recommendations on property taxes or other property planning issues and prepare a strategy to manage your assets at the time of your death.
- Insurance Agents: These are the individuals who are licensed by a state or states to sell life and health or property and casualty insurance products. Many financial planners are certified to sell or give the recommendation on insurance products.
- Investment Adviser: Investment advisers are those individuals or agencies that provide securities advice for compensation as a part of a regular business. They have to register with the Securities and Exchange Commission (SEC) or suitable state security agencies until specifically exempted.
- Stock Broker: Stockbrokers are also called registered representatives who are licensed by the state to practice buying and selling of security products such as stocks, bonds, and mutual funds.
What to look for in an advisor?
- Credentials: There are several licenses and certifications that an advisor can have such as CFP, CFA, CPA, and ChFC. The CFP that is the Certified Financial Planner is considered as the gold standard in the industry.
- Records: It can be easily seen if an advisor has any kind of legal or ethical marks against them such as certain criminal charges, investigations, bankruptcies, etc. on BrokerCheck. Advisors are required to show any disciplinary actions and conflicts of interest on part 2 of their ADV.
- Experience: It is very important that an advisor should have a relevant experience and education along with an ability to deal with real-life situations.
- FIT: This is the most important practice. As you must be able to trust your advisor, most advisors also provide Free Initial Consultation to let you know about their practice.
How to work with a Financial Advisor?
- It is better to make sure that your situation is similar to the advisor’s client base.
- It is also important to understand how your financial advisor communicates with the clients and the frequency of those communications.
- How often will you have to meet to review your portfolio and your overall situation? Will these meetings be performed in person or over the phone or through Skype?
- You may find your advisor based on your age and digital comfort level.
What questions are to be asked to your financial advisor?
- Will they help you in tracking your investment cost basis?
- Can they help you in filing your tax return and assist you with other tax-related questions?
- Will insurance products be reviewed? (i.e. life insurance, long-term care, annuities, etc)?
- Can your advisor help you plan your estate?
- Will they refer you to some other expert if the firm itself cannot provide the service?
What homework should be done before choosing a financial advisor?
It is very important that you do your homework while choosing a financial advisor since one hopes for this to be a long standing, trusted relationship.
- Advisors should be capable of directly answering your questions with exact, documented proof of the following: fees, standards, client bill of rights, and code of ethics.
- Even if it is not easy asking the questions, however, it is essential to set a standard for the service you expect.
- Your retirement portfolio and belongings are one of the most essential investments you’ll ever make and also you need to choose a person who will assist you to set you up for success.