A financial adviser will work with you and your family to plan for your future. Knowing that your retirement plans are in good hands gives you peace of mind. In an unsure investment market, financial advisers (sometimes called financial planners) are tasked with getting you the most out of your investments and ensuring the stability of your financial future. This is no small task, so you should carefully vet the person you choose to give this enormous responsibility to. Here are 4 ways to ensure you are choosing the right financial adviser.
1. Ask them to explain a financial concept you don’t understand.
There are so many aspects to finance and investing that there is bound to be at least one that you are not clear on or perhaps never even heard of. Sit down with a potential financial adviser and ask them to explain that concept to you. Listen carefully and see if they explain it in a way that you understand. If you still don’t understand the concept, then they are not good at explaining things.
You don’t want to work with someone who doesn’t explain things in a way you understand. Somewhere down the line as you work together, there will be another situation where they will need to enlighten you about a financial product or practice. If you don’t understand them now, you likely won’t later, either. Only work with someone who clearly defines everything they are doing in a way that you understand.
2. Ask them if they have an area of expertise.
Many advisers have an area that they specialize in. For example, some specialize in working with retirees or people nearing retirement age. If you are young or middle-aged, this may not be the best adviser for you. Ask how many clients with financial prospects similar to yours (i.e. same income, age, etc.) they have worked with and what the outcome of that partnership was. You want someone with expertise handling clients just like or similar to you.
3. What is Your Payment Structure?
This is one of the most important things to consider before hiring a financial planner. Some charge a flat or hourly fee for their services. You will want to find out what those fees are up front so you can include them in your budget.
Other financial advisers will simply take a small commission from the investments they begin on your behalf. This may seem good to you because it saves you money in up-front fees. There is a big drawback to this type of payment structure, however. If they get paid in commissions, then they are more likely to gamble with your money trying to earn the most money for themselves. Their loyalty may be to the investments rather than to you.
If you pay them up front, then their loyalty is to you. They also know that if they do a bad job, you could just fire them and their only income from you is gone, since they don’t get commissions. It may be better in the long run for you to shell out the fees or hourly rates.
4. Get References
Always find references from current or past clients that have worked with this adviser. They are a great indicator of how well they perform their job. If the references aren’t good, move on. If the references are great and you feel comfortable with all the answers they gave you to the above questions, then this may just be the right financial adviser for you. Just remember to shop around; you don’t have to sign with the first adviser you meet with.
Phillip Mauzi is a financial blogger who specializes in a variety of topics that have become very important in today’s weakened economy. These include current mortgage refinance rates and the state of unemployment across the country.
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