The Ultimate Guide To Choosing A Financial Advisor

The Ultimate Guide To Choosing A Financial Advisor

by Sumaiya Minnat
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Earning money is tough and managing your earned money is equally challenging. You need to have sound financial knowledge to put your hard-earned money to best use; otherwise, you will be losing money. Hiring a good financial advisor can be helpful to put your money in the right places so that it grows with time and you become financially stable.


How Is A Financial Advisor Helpful?

Though the job of a financial advisor is to manage people’s money, they do a lot more work than that. They can plan for your retirement; major life events like weddings or paying for your child’s college; delving into major investments like buying stocks or a house; paying off mortgage, returning to a credit-free life, buying insurance, making a tax plan, and others. A financial advisor will manage your investment portfolio as well.


When Do You Need A Financial Advisor?

A financial advisor will help you achieve your financial goals and grow your wealth over time. It is not true that only the rich need a financial advisor. Even if your earnings are low, you need a guide to keep your money in order so that you can live on a budget and save money as well. A financial advisor does these jobs for you. Here are some situations when it is highly recommended that you hire a financial advisor:

💹 If you want to invest your money but don’t know what are your best options then you can consult a financial advisor.

💹 If you are planning for your retirement then a financial advisor can plan the best financial journey for you so that you can have decent savings before you retire.

💹 You can get valuable insights from a financial advisor about managing your lifestyle properly to lead a financially strong life and creating a budget as well.

💹 If you have a lot of debts then it’s time you seek help. If you don’t know how to pay off the debts on time, you can get into a lot of trouble. A financial advisor will come up with strategies to help you get clear of debts.

💹 A financial advisor can think of multiple income streams to support your living.

💹 You will get good advice from a financial advisor on what to do with your inherited assets by devising a wealth management plan.

💹 If you are thinking of starting or selling a business, you should hire a financial adviser to help you with the detailed planning.

💹 Life events like weddings or children moving to college can be exciting and challenging. A financial advisor can help you overcome the challenges and fulfill your goals.

A financial advisor will give you informed decisions on your investments and savings. They know about the market trend and can advise the best option for growing your money. So, whenever you find difficulty in managing your finances or think that financial advice is necessary then hire a good financial advisor. You can be saved from costly mishaps if you follow the advice of an experienced financial advisor.


How To Choose A Good Financial Advisor?

As the market is full of illegitimate financial advisors, your goal will be to choose a trusted partner who will look after your money carefully. So, never hire a financial advisor without doing proper research, background checks, and other steps. Here are the steps you should follow when choosing a good financial advisor.

Evaluate Personal Needs

Before you hire a financial advisor you should evaluate your personal financial needs. Do you want to start saving for your retirement, pay off all your debts, or buy a house? As financial advisors have different areas of expertise it is essential to first recognize your needs so that you can choose the best financial advisor to solve your problems.

Learn About The Various Types Of Financial Advisors

Financial advisors can play different roles, for example, tax professionals, investment professionals, wealth managers, financial planners, financial consultants, and others. They also have different titles like Personal Finance Specialist (PFS), Certified Public Accountant (CPA), Certified Financial Planner (CFP), and others. You should choose someone with the right qualifications and experience. Financial advisors can be categorized into robo-advisors, online advisors, and traditional financial advisors. Robo-advisor is a digital service that provides low-cost investment management, retirement planning, or other financial service. Here you answer some online questions based on which the computer algorithm will develop an investment portfolio or a retirement plan for you. Online financial services let you communicate with a team of financial advisors online. You can join Zoom sessions, and use email or chatting apps to communicate. The traditional financial advisors will meet you in person and solve all your financial management problems. They are expensive, but you will get a fully customized financial plan from them.

Know About The Tasks They Do

If you don’t know what financial advisors do then you may not get the best outcome. They will look after your investment portfolio and suggest to you where to invest and where not to get a good return. They can help you with your retirement planning so that you have sufficient money before you retire. Every year you need to give tax and a financial advisor can prepare your tax files. If you are planning to invest in real estate then they are the best people to seek advice from. If you are in the middle of a complicated financial situation then a financial advisor can pull you out from there. Sometimes people get confused when they inherit a lot of money; a financial advisor can allocate their inheritance money to profitable ventures.

Find Out The Cost Of A Financial Advisor

Financial advisors are usually paid in two ways: fee-only or commission-only basis. In the case of the fee-only basis of payment, the financial advisor will get a flat rate, hourly rate, or a percentage fee. For commission-only payment, you pay the financial advisor a port of the amount of money you invest. For example, if you invest $20,000 in stocks, then you pay 5% of this, which is $1,000 to your financial advisor. You should choose a financial advisor depending on your budget. Robo-advisors charge an annual fee depending on your account balance at the end of the year. It can be 0.25% to 0.50% of your assets too. The Online financial advisors will charge a flat fee or a percentage of the assets. Traditional financial advisors on average charge 1% of the wealth they manage.

Do A Thorough Research

You should ask your friends, family members, or colleagues for recommendations. Someone you know may have taken the services of a financial advisor and they can give you suggestions. You can do a thorough research online and find a good financial advisor. You should visit their website and social media pages to learn how experienced they are. You might find client testimonials that will give you a real picture of the financial advisor. Trade groups like the National Association of Personal Financial Advisors (NAPFA), Financial Planning Association (FPA), or Certified Financial Planner Board of Standards can give you a list of good financial advisors. After you shortlist several financial advisors, arrange an interview with them. Ask questions to find out if he or she can meet your requirements. You should be able to trust your financial advisor.

Arrange An Interview

You must meet the shortlisted financial advisors in person and discuss your needs and how to solve them. You should learn about their previous works, areas of specialty, communication strategy when assigned to a project, licenses and certifications, compensation for any loss, payment policy, and others. If you don’t get all the answers to your questions then there must be a communication gap and you should look for other finance advisors. You should hire someone you are comfortable talking to about your finances. A good financial advisor will explain to you all the things you don’t understand so that you can actively participate in decision-making regarding investments and financial management. What licenses or certifications do you have?


Final Verdict

Trusted and experienced financial advisors will help you to achieve your financial goals and manage your finances. They can solve your complex financial problems. If you can find the right financial advisor then wealth management won’t be a problem for you no matter how diversely you have allocated your funds. You have to remember that there are scammers everywhere. A legitimate financial advisor will not hide any information from you, tell you about the risks associated with different investments, and give an estimate of a realistic return on the money you have invested. You will feel stress-free when a good financial advisor will handle all your finances.

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