Taking the time to learn how to choose a financial advisor to help you reach your financial goals is crucial. For instance, when looking to hire an attorney to handle your legal matters, you just don’t hire the first one that you’re able to find. You want to make sure that the attorney is well qualified, has a good reputation in the community, will act in your best interest, and that they charge a reasonable fee.
Choosing a financial advisor is just as important. This makes it important to learn how to choose a financial advisor.
Financial advisors advise clients on how to save, invest, and grow their money. They help them set financial goals, like getting ready to buy a house, and create a plan to achieve them. So if you need help with your finances, a financial advisor can help.
Indeed, finding and choosing a financial advisor is not that hard to find. There are so many and different types of advisors out there to choose from.
However, when choosing a financial advisor you should do so carefully, because not all financial advisors are created equal. Some are better qualified and experienced than others; and some have financial advisor fees that are more reasonable than others.
This makes it very important to do your due diligence and research any financial advisor you’re considering to make sure they are the right fit for your needs and situations.
If you’re looking for a financial advisor near you that is qualified, licensed and has experience on advising people with similar needs to you, click here.
Check out: 5 Signs You Need A Financial Advisor
Here‘s how to choose a financial advisor for your situation:
1. How to Choose A Financial Advisor?
The first step when it comes to finding out how to choose a financial advisor is to shop around.
Shopping for multiple financial advisors allow you to know which advisor is the right fit for you. When you’re shopping for a mortgage to buy a house, you don’t just speak with one mortgage lender. Instead you speak to multiple lenders to see which ones give you the best rates and best terms.
The same is true when choosing a financial advisor. You want to make sure that advisor has dealt or has the experience with the kind advice you are seeking.
One of the best ways to pick a financial advisor is to use SmartAsset’s free financial advisor matching tool. All you have to do is answer a few questions about your retirement goals, your investment goals, your preference, etc.
With the information you provide, they will match you with up to three financial advisors in your area who offers the services you are looking for in just 5 minutes.
Moreover, what makes choosing a financial advisor through the SmartAsset’s matching platform is the fact that each one of them is properly registered with either the U.S. Securities and Exchange Commission or the appropriate State regulator.
That gives you peace of mind knowing that they’re properly licensed and regulated.
See: 5 Mistakes People Make When Hiring A Financial Advisor
Still not convinced yet? Keep reading to find out how to choose a financial advisor!
2. Questions to ask a financial advisor.
You need to ask questions that are unique to your individual needs. While you might have hundreds of questions you want to ask the advisor, the following five are crucial to ask:
See: Compare local financial advisors to find the right one for you.
Below are some of the questions yo need to ask a financial advisor:
a. What are your qualifications?
You should ask the advisor for the right qualifications for your needs. So any qualifications in finance, accounting, or economics is desirable.
Asking this question will let you know the type of financial advisor you’re dealing with. They may have several licenses and certifications, but the most important one is the CFP (Certified Financial Planner).
To become certified, the advisor has to pass a six-hour exam. And after they’re certified, they have to complete continuing education.
b. How long did it take you to get your education?
The financial advisor should be able to tell you whether they have advanced degrees and the length of any courses they have taken. The more education they have, the more qualified they can be.
c. What is your experience as a financial advisor?
Details about their level of experience is equally important. You want to make sure they have been offering financial advice for a good number of years.
You also want to make sure they have the experience dealing with the kind of advice you’re seeking. For example, if you’re planning for retirement, you would want someone who has advised other clients about retirement planning.
d. Are you ethical?
One of the most important questions to ask a financial advisor is whether they are ethical.
Knowing whether your potential advisor does not have any criminal charges or bankruptcies against them is important in choosing a financial advisor. However, you shouldn’t literally ask your potential advisor this type of question, as it might be considered offensive and rude.
But you can find out by doing your own due diligence. Go to the U.S. Securities and exchange Commission Investment Adviser Public Disclosure website. There you can see the status of their licenses and see if there any disciplinary actions them.
If you don’t have time to go through with all this trouble, then use the SmartAsset’s Financial Advisor free matching tool. The advisors there are properly regulated.
d. What is your fee structure?
Financial advisors are paid in three ways: commission-based, fee-based and fee-only. Commission-based financial advisors get a commission when they sell you financial products such as mutual funds, annuities, and insurance. Fee-based advisors not only provides financial advice for a fee, but they also get paid a commission on the financial products they sell you.
As for the fee-only advisors, they only charge you for the services hourly, flat rate, or a percentage of the assets they manage for you.
These financial advisor fees can be significant. So ask the financial advisor for an estimate of the cost of the advice. Even a rough estimate will give you an idea of how much you will pay for the advice.
In some, learning how to choose a financial advisor does not have to be that hard. You just need to know where to find them and need to know whether they will act in your best interest. Fortunately, SmartAsset’s free matching tool has made the process much easier.
Read More
- Find Out Now 7 Questions People Forget to Ask Their Financial Advisors
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Speak with the Right Financial Advisor For You
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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