Everything to Consider When Choosing a Financial Advisor

If you’re not an expert in financial matters, you may wonder if hiring a financial advisor is a good idea. Choosing a financial advisor can be a bit daunting.

There are many people calling themselves “financial advisors” these days. But not all of them have the qualifications for the job.

You want your financial decisions in the right hands. So it’s important to do your research before making a choice.

Here’s a guide for choosing the right financial advisor for you.

Your Financial Needs

The benefits of using a local financial advisor can be huge. They can help you map out your financial future and make sound financial decisions now that will benefit you in the years to come.

As you consider selecting a financial advisor, think about your current financial situation. Ask yourself:

  • What are my immediate goals?
  • When do I hope to retire?
  • How should I build my nest egg?

Whether you’re at the beginning of your career, somewhere in the middle, or nearing the end, you may benefit from working with a financial advisor. They can evaluate your current situation and your goals to help you invest and save for retirement.

An advisor can handle your day-to-day planning, manage your investments, including IRAs, 401Ks, stocks, and more. There’s an array of variables to consider in financial planning.

These may include your current income, career, potential future income, business investments, and others. Getting sound financial advice at any stage of life is important.

You want to feel confident that your financial house is in order and your financial planner has your best interests in mind.

Referrals From Those You Trust

It’s easy to find a financial planner in your area, but don’t rush to choose the first one you stumble upon. You want to do some research and gather a small pool of qualified candidates to choose from.

Asking friends, family, and colleagues for recommendations is a good start. If they’ve had a great experience with someone in the field, ask them to share their experience.

You can also look to major industry associations. The National Association of Personal Financial Advisors and The Financial Planning Association offer tools to help you look up financial professionals in your area.

You want to choose a financial advisor with a good reputation in your local area. Be sure to read online reviews. Narrow down your choices and compare the options to find a good fit for your needs.

A Professional Website

A professional in the finance industry should have an up-to-date website that’s easy to navigate. A website is the storefront for a financial advisor and should relay their services, credentials, specialization, and contact information.

Their website may give insight into how they do business and the types of customers they work with on a regular basis. Take a look at their services, FAQs, and any client testimonials as well.

Consider whether the website appeals to you, but don’t base your decision on their website alone.

Professional Background

Putting your money in someone’s hands is a big decision. Make sure you do your research before hiring anyone to handle your financial matters.

The industry makes it easy for consumers to learn about a financial advisor’s background. You can find out about advisors via BrokerCheck. You’ll see how long they’ve been in business, who they’ve worked for, and whether they’ve had customer complaints or regulatory issues (disclosure events).

If an advisor has a disclosure, it’s not necessarily a deal-breaker. Sometimes these complaints relate to bankruptcy or a resolved problem. So if there’s an issue, take some time to fully investigate it before making a decision.

It never hurts to do a quick Google search on any financial professional you’re considering hiring. You can learn a lot. If a client has had an exceptionally good or bad experience, the reviews can be quite telling.

A Fiduciary Standard

A “fiduciary” is someone legally required to act in your best interests. This is the highest standard in the financial industry and should be a priority when searching for an advisor.

A firm that holds to a fiduciary standard must disclose any potential conflict of interest and work in the best interest of the client. You want a fiduciary working for you.

Be sure to ask if they are a Registered Investment Advisor (RIA) and if they are held to the fiduciary standard. A reputable financial advisor should be willing to answer your questions and provide any documentation you need.

Credentials and Qualifications

Before hiring a financial advisor, check their credentials. Look for well-recognized standards in the industry, such as a chartered financial analyst (CFA) or certified financial planner (CFP).

To achieve these credentials, they must master a body of complex financial information and pass a comprehensive exam. It’s good to know you’re placing your trust in a qualified professional.

There are various licenses and certifications financial planners can attain. These demonstrate their competency in specific areas of financial planning such as taxes and accounting (CPA), portfolio management (CFA), and personal financial planning (PFS).

Services Offered

An important question to ask a potential financial advisor is what type of services they offer. You want to have a clear understanding of who you’re hiring and what types and level of service they provide.

You may need services beyond asset management and general financial planning. Many advisors offer services such as estate planning, insurance, taxes, budgeting, college planning, and succession planning.

The market is overflowing with financial experts. And advances in technology allow many of today’s investors to participate in the market at a reduced cost.

These changes have led many advisors to reduce their fees and offer a wider variety of financial services for their clients. If you have an area of need, be sure to discuss it with the advisor before making a commitment to move ahead.

A Solid Investment Process

It’s smart to ask about the advisor’s investment philosophy and how they plan to invest your money. Many advisors will respond with a standard answer about goal setting, risks, and asset allocation.

But what you’re looking for is an idea about how they’ll manage your money once you’ve identified the goals, assessed the risk tolerance, and established asset allocation.

Will they pick individual stocks? What kinds of investments do they prefer? Will they go with a multi-faceted approach? These are all good questions to ask.

Ask what kinds of research they rely on. Specific questions are more likely to elicit a thoughtful discussion and transparent approach to financial planning.

Introductory Call or Meeting

Along with your online research, it’s a good idea to meet a financial advisor in person before hiring them. This individual will be giving you financial advice for the future, and you want to be confident in your decision.

You should meet them, learn about them, and make sure you agree with their approach. To prepare for an in-person or phone meeting, the CFP Board has a list of questions you can use when interviewing a financial advisor.

Be sure to ask about their experience, education, qualifications, and clients. If their regular client is the complete opposite of you, it may be the wrong fit.

A financial advisor is someone you may be working with for years to come. You want a comfortable relationship with them. You should feel free to ask questions and share your thoughts as well.

Life Transitions

Like most people, you’ll probably experience many transitions in your life. Your financial needs will differ as you go through these stages.

You may get married, have children, endure loss, experience divorce, or make career changes. Your needs as a young parent vary greatly from your needs as an older parent with a child in college or a senior facing retirement.

You want a financial planner who has experience working with clients in all seasons of life. They should know how to help you plan and manage these changes if or when they occur.

Through life’s ups and downs, a long-term partnership with a financial advisor can provide financial stability and peace of mind.

Clear Fee Structure

You want to identify how the advisor is compensated to better understand the potential incentives and any conflicts of interest. Financial advisors receive payment through client fees, commissions, or a combination of both.

Make sure you understand the services they provide and the pricing for those services. Most advisors use one or more of the following:

  • Hourly fee – This is based on the time they spend with you and working on your behalf.
  • Fixed or flat fee – This is an agreed-upon flat fee for their services.
  • Assets under management fee – This fee is based on a percentage of managed assets.

During the initial meeting, expect a clear answer regarding fees. Don’t hesitate to ask about the fees and any potential hidden costs.

It’s important to understand the fee structure and to feel comfortable with the arrangement. You want to feel confident about your financial planner’s motivations and whether they have your best interests at heart.

Education and Events

Many investors want to be active participants in their financial decisions. They want to know what’s going on with the protection and growth of their assets.

You want a financial advisor who includes you in the process and educates you along the way. They should be willing to listen and meet with you regularly to review their actions and the progress taken toward your financial goals.

A reputable company values you as a client and will include you in the decision-making process if that’s your preference. Many financial advisory companies hold educational events for clients and the community as well.

Considerate of Your Needs

good financial advisor possesses competency, humility, and empathy. They must be able to relate to their clients, listen to them, and address their needs and concerns.

A good advisor establishes trust with their clients. This is the only way to build a relationship that will endure over time.

Your financial advisor should understand your goals and dreams for the future. They can offer a realistic look at your current financial picture and weigh the possibilities for the future.

They should be a steady voice of reason throughout the ups and downs of the market and life’s transitions. The goal is to lead you to smart decisions, avoiding emotional ones and costly mistakes.

Tax Implications

With any financial decision, you must be aware of the tax impact. Your financial advisor should always weigh the risks and benefits of any investment.

Sometimes the tax burden of investment is too great. Understanding the financial impact of these decisions falls to the advisor.

They should always look for ways to minimize the tax burden so your net return is as much as possible. Be sure to ask about the tax implications of any investment before making a decision.

Minimum Investment Requirement

Some financial advising firms require a minimum investment in the beginning. Make sure you understand any and all requirements, including the fee structure and any conflicts of interest.

If you’re not sure of how the financial advisor is compensated, you can search a firm’s SEC filings. You want to feel confident about your financial advisor’s motivations and vision for a healthy financial future.

Choosing a Financial Advisor

Like any major investment, selecting a financial advisor requires scrutiny. It’s a serious decision that can impact your financial security in the years to come.

That’s why you want to know what to look for when choosing a financial advisor. Ask the right questions and weed out the ones who don’t fit your vision or needs.

Having a great relationship with your financial advisor will benefit you now and in the future. Take the time to research prospective advisors who can help you make the most of your wealth and financial future.

We’d love to talk with you about your financial goals. Contact us today to learn more.

Disclaimer: “Sara-Bay Financial Corp. is registered as an investment advisor with the SEC. All information contained herein is for informational purposes only and does not constitute a solicitation for investment advisory serves or an offer to buy or sell securities. Registration does not imply a certain level of skill or training. If you are interested in our services, please see our Disclosure Brochure (Part II of the form ADV); which provides detailed information about Sara-Bay Financial Corp. and inherent risks that may be associated with our advisory services.
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