Finding a financial advisor can be an intimidating process. It’s not just a numbers game to find who is the best at navigating the markets. It is a personal relationship, and you should get someone to listen to you and work with you to help you reach your goals.
One common misconception is that only people with a lot of money to invest need a financial advisor. Everyone needs an advisor, just as everyone needs to pay an annual visit to the doctor. Everyone needs to be educated about cash flow, debt, savings, goal setting, goal planning and retirement, asset protection, securities, insurance and tax planning.
A more economical alternative is the use of a robo advisor: sophisticated computer software that selects your investments and balances them automatically. Companies like Betterment, WealthFront, WiseBanyan, Personal Capital and FutureAdvisor, offer robotic investment services. Brokerage houses such as Charles Schwab and Vanguard also offer computerized assistance models.
Robo advisors offer automated investment advice and may be low cost, but they’re not very personalized. There are two types of people who can use this service. Someone who is very wise in investments and does a lot of research , and someone who has a small amount of money and just wants to get into the game.
A human financial advisor can develop a comprehensive financial plan, guide you in money matters such as taxes or insurance, or manage investments for you. If you like to do it personally, an advisor can review your investments to make sure you’re on track.
Here are some tips to help you find the right financial advisor:
-Look for professional titles: Anyone can become a financial advisor. You can find them in banks, brokerage houses, insurance agencies and independent firms. But do not confuse an advisor with a salesperson. The golden rule is a Certified Financial Planner (CFP) or Certified Financial Advisor (CFC) who has taken classes on different aspects of financial planning. Another designation to look for is a person who is committed to working with a “fiduciary level,” which means that they have promised to put the interests of the client above theirs, and to recommend products that are the best for the client, even if that means earning a little less. The Financial Planning Association, Onefpa.org, has a list of certified financial planers organized by zip code.
-Look at what they charge: Some planners only charge fees and don’t make money from the investments they sell. Others charge an annual percentage for their assets, usually 0.5 to 2.0 percent for their management. Some earn commissions based on what you buy. They may be tempted to trade constantly, which will mean big commissions for them, but it’s not necessarily best for you.
Many planners have a minimum investment of $ 250,000 and upwards. They can charge an initial planning fee of $ 750 for a computer program, or up to $ 10,000 for portfolios of millions.
Some advisors offer a second opinion to investors who do the work on their own, who have their money with low-cost brokerage houses like Vanguard, Fidelity or T. Rowe Price, or who have most of the funds invested in a 401 (K). Since these customers don’t have a lot of money that needs to be handled, those people will pay a flat fee for a year of planning and guidance. That fee can vary from several hundred to several thousand dollars, or one percent of net profit. The client can return for a re-evaluation when needed.
Research: Find a network counselor’s place to get information about your specialty, such as college or retirement plan, and read their biography. Determine how much money you want to invest. Think about how much time you have to invest and your goals.
Be prepared to search and ask questions. It’s a personal relationship. You have to feel comfortable and you have to be able to trust the person who will work with you.”
To start, make appointments for an initial consultation with several planners. Some charge and others don’t. Find someone to listen to. Ask about risk tolerance. There must be some kind of tool that will help you in the goal, such as a questionnaire, in addition to the conversation, to help the planner calibrate your tolerance. Discuss the way they will be paid.
Be prepared to speak at the interview. Take a list of questions, like when you see a doctor.You want to make sure you find someone you’re comfortable with and in turn, feel comfortable answering your questions.
Ask for referrals from clients whose situation is similar to yours. Check the CFP Board page or the Financial Industry Regulatory Authority, Finra.org, for the disciplinary history of illegal or unethical actions.
Above all, it’s important that you have good communication with the counselor, that the counselor listens to you and understands your personal goals.
Questions for a potential financial advisor:
Tell me about your experience in this field. How long has it been in it?
▪ What are your qualifications and education?
▪ Which professional organizations do you belong to?
▪ What services does it offer?
▪ What is your investment philosophy, conservative or aggressive?
▪ What types of clients do you usually work with?
▪ Who will handle my account?
▪ How do you get paid?
▪ What are your usual fees?
▪ Is there any conflict of interest in the products you sell?
▪Have you ever been penalized for illegal or unethical actions?