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Things To Consider When Hiring A Financial Adviser
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However, even if you would like to hire someone to take a look at your finance, it would be a tricky situation. How do you know who to trust and who is professional enough to give you a solid advice? This is what we will try to cover on this article. Financial advisers range from conventional in-person financial advisers to automated investment management services. There are also financial planning services and online financial advisers who, just like traditional advisers, offer the same service.
However, even if you would like to hire someone to take a look at your finance, it would be a tricky situation. How do you know who to trust and who is professional enough to give you a solid advice? This is what we will try to cover on this article. Financial advisers range from conventional in-person financial advisers to automated investment management services. There are also financial planning services and online financial advisers who, just like traditional advisers, offer the same service.
Understanding various categories of financial advisers
Different types of financial advisers offer financial planning services and those offering investment management advice. Some just manage investments and offer little financial planning, and then some offer retirement income planning. Therefore it is important to understand the kind of advice you need and thus the type of adviser.
Check credentials of the financial adviser
Financial advisers are professionals; therefore, they need to be accredited from professional bodies. If you get an in-person financial adviser, they might not provide the range of services you can get from a firm. Look for financial advisers or planners with accredited reputation have a Personal Financial Specialist (PFS) or Certified Financial Planner (CFP) designation or one with a Chartered Financial Analyst (CFA) certificate. You could also check if one is a member of The National Association of Personal Financial Advisers.
Know how the financial adviser is paid
Services of financial advisers are not free, and thus they are compensated. To hire one, you should know how they are compensated, which can be through asset-based fees, commissions, and fee-only. Commission-based are those who sell financial products such as insurance and mutual funds and earn commissions. Since they are paid to get sales, it is important to know that there is a conflict of interest and can misrepresent advice. Fee-based advisers just like commission-based advisers are paid a fee and are affiliated to an agent to sell products. Fee-only is the best type of financial advisers because they act with the best interest of the client. They make money through percentages of assets they manage and hourly rates.
Conduct an interview
You should conduct an interview and ask questions that will help you in identifying the right financial adviser. An interview can help you get to know the areas of specialization of the adviser and how they communicate. Always look for references because an adviser might not give one since laws prohibit them from using testimonials.
Be keen on fraud risks
It is easy for someone who has custody of your assets to perpetrate fraud. Usually, financial advisers use a third-party custodian such as Fidelity or Charles Schwab to hold your assets. This means they will open an account with the custodian and conduct trade through the account, and it is the custodian who will report transactions to you.
Verify credentials of the advisor
Make sure that the adviser you are planning to hire has a good track record and verify their credentials with the Securities and Exchange Commission, the CFP Board and the Financial Industry Regulatory Authority or any other body. Ensure there are no complaints against the adviser, and you can use Bightscope to check the organizations the adviser is registered with.
