The financial advisor or planner ecosystem is surprisingly complex. Nowadays, anyone with minimum qualifications is calling themselves a financial coach, planner or advisor. Consequently, you ought to be careful and thoughtful when picking a professional who will help you sow, protect, grow and save your capital.
When choosing a financial advisor, know exactly what you are looking for or what you want to achieve. There are different categories of financial advisors. Keep in mind that a financial advisor is someone who will dig deep into your saving and expenditure habits hence lay hands on very sensitive financial statements. This makes the process even more complicated. Below are the things you should look for in a financial advisor.
Run a background check
Ensure you do not fall for empty words. Let the advisor shows you the steps or efforts, he or she has taken to develop into an all round financial coach. One way to do this is by scrutinizing various certifications that they hold, the time required to get one and requirements needed to hold the designation such as discipline records.
Additionally, start by asking the following questions: Has the advisor been under any regulatory body investigation or convicted of any crime? If so and found not responsible or guilty, then gather some views from clients whose plans and finance match yours. This will help safeguard your money.
Standard of care
Any registered financial firm or individuals are mandated to be fiduciaries. In simple terms, they are supposed to put the best interest or good will of their clients above anything else at all times. However, some working environment doesn’t mean the advisor has to be a fiduciary, for example those working at brokerages and banks. Since it’s a requirement by RIA for financial advisors to be fiduciaries, many will claim to be so, be careful not to fall for a rogue one.
Working relationship
Before you decide whom you are going to work with, understand how often you will be interacting. Some advisors or firms run upfront initial meetings ad check with you once per year while others offer you a shoulder to lean on throughout the year. The latter is the best as they help you implement the plan effectively. You too should evaluate the situation to see if the coach is making it complicated, to a point you cannot manage it for yourself. Jogging these aspects will help you also determine if the advisor has any best interest in your business.
The advisor’s pay structure
Avoid financial advisors who are commission based because they are likely to push for an insurance policy or mutual funds as long as they are getting a cut out of it. Fee-based professionals aren’t good either. If one is getting his or her earnings on the 1% annual assets rule, he may be forced to trick you to liquidate your capital into assets even if that wasn’t the right move at that time. If you’re a newbie, advisors who charge based on hours are the best. They will strive to make you grow because they too need your recommendations for them too to develop. Hence, a win-win situation.
In the world of sports, sport-stars often seek advice and training from best trainers available in order to achieve their optimal performance and become the best. Likewise, for you to reach or perhaps exceed your financial ambitions, seeking help/advice from a financial coach is routinely the best option for you to create, maximize, grow and protect your wealth. Creating and executing a firm financial plan is arguably the best way for you to attain sustainable current and future financial freedom.