If you’re on the search for a financial advisor, it’s important to know what type of support you’re looking for and whether your advisor will deliver. From giving insights about stock options to helping plan your retirement, an advisor can be a good aid when you don’t have the time or knowledge to evaluate your situation. Here are some questions you can use to find an advisor who’s a good fit for you.
1. What certifications and specialties do you have?
Not every financial advisor focuses on the same thing, so if you need an experienced professional for areas like taxes and investments, check their specialties. Look for titles like certified financial planner, or CFP, and certified public accountant, or CPA, among others. Plus, some advisors only focus on a niche, like special-needs families or airline pilots. One way to gauge an advisor’s expertise is to see whether his clients’ situations match yours.
2. Are you a fiduciary?
Fiduciaries are individuals who are legally obligated to act in your best interest rather than their own. Some commission-based advisors only need to make “suitable” recommendations, not those that are best for the client. Also ask prospective advisors if they have ever been sued or had any reported legal actions, and check them out through the Financial Industry Regulatory Authority’s website.
3. How — and how much — do you charge?
A fee-only advisor charges a flat fee based on the total value of your account, not the investments you make. Because of this, his or her goal is to grow your account and work in your best interest. Fee-based and commissioned advisors get at least some of their money from selling their in-house mutual funds and can come under selling pressure — and conflict of interest — as a result.
4. Will you or a team be working with me? How often will I deal with you?
The advisor may not be the only one you will work with, especially when you’re dealing with a big firm. You should know the firm’s dynamic and determine who would regularly reach out to you. Make sure you know how often the advisor will work with you personally. A yearly check-in is recommended.
5. What services do you provide?
An advisor’s responsibilities can include reviewing personal budgets, helping with retirement and estate planning, giving investment advice and doing insurance analysis, but not all advisors do each of these. Decide which services you specifically need.
6. What is your investment approach?
Determine if the advisor’s investment plans are actively managed or passive. The former means that the advisor may try to beat the market through managed funds, which offer the potential for greater returns but carry greater risk. A passive approach can involve index funds, highly rated bonds and money markets. Your advisor should work with you at your level of risk tolerance and know to allocate your assets in taxable or tax-deferred accounts as the time arises. This is especially important if you’re optimizing funds for retirement.
7. Why do you think you would be a good advisor for me?
The person you choose will be advising you on your money and giving projections that you should be able to trust. Make sure he or she can accommodate you and your needs.
Spending a few hours meeting advisors may be time-consuming, but connecting with one who suits your goals is good for you and your financial health in the long run.