5 (Five) Questions to Ask When Choosing a Financial Advisor and Planner

5 (Five) Questions to Ask When Choosing a Financial Advisor and Planner

5 (Five) Questions to Ask When Choosing a Financial Advisor and Planner


Sometimes, you might not be able to decide on the proper mix of insurance, investments and the like after taking a look at your own financial state. This is where a good Financial Advisor comes into the picture. He/she would help you make broader-based investment recommendations based on extensive knowledge of your financial state, set up financial goals, and create a plan you’d follow to achieve them. The only issue with this is that anyone can call themselves a Financial Advisor or Planner even without the minimum qualification. You don’t know which Advisor is legit. As a result, it’s important to be careful and thoughtful when choosing a professional to help you out with savings and financial growth.

How then would you know if you’ve found a good one? Well, at first you can never be too sure, but if you put these five things into consideration while searching, you’ll definitely find the right one for you.

One more thing, there’s a difference between a Financial Advisor and a Financial Planner. Don’t mix it up. A Financial Planner is a person who helps you set up a financial plan of some kinda method for solving whatever financial problem you may have, while a Financial Advisor shows you how to execute that plan by carefully selecting investments and insurance. “Financial Advisor” tends to be a broad term that includes Investment Advisors, Insurance Salesmen, and other such Financial Professionals.

So, from this point on and for the sake of easy understanding, I’m going to use the term “Financial Advisor”. I hope you understand? Since that has been taken care of, let’s proceed.

  1. Check Level of Experience in the Field

Your Advisor should be well experienced. In particular, seek Advisors who have demonstrated they can actually apply their knowledge to develop an optimal strategy for you. Their website and articles could be a good starting point to learn about their qualifications, planning practice, and thought process. With a few years of experience in finance-related fields, such as accounting, securities analysis or trading, or law, you can rest assured that he/she is good for you.

2. Check Credentials

Another way to determine a good Financial Advisor is through the various certifications they may hold. How has the Advisor increased his knowledge in the field? What are people saying about him/her? Also, learn about both the upfront requirements needed to attain a certification and the ongoing requirements for maintaining the designation. A good example is the Certified Financial Planner (CFP) among many others, which is probably the best-known credential. Graduates must take a series of courses, pass a two-day, ten-part exam, and complete three years of work experience to earn the CFP designation. In addition, they must complete 30 hours of continuing education every two years to keep the credential. The coursework usually takes a couple of years or more to complete and covers virtually all aspects of financial planning for individuals.

These titles will give you the assurance that your soon to be Advisor took the trouble to take the courses to raise his or her level of skill and knowledge in the field.

3. See if He/She has Access to other Experts in the Field

No matter how well trained a person can be, they cannot deal in-depth with all the problems that can affect an individual’s financial affairs. An Advisor should be able to show you that he/she consults regularly with experts in a variety of fields.

See Also: 7 (Seven) Ways to Advertise Your Small Business Online With Little or No Money

4. Check Fees and Commissions

There is no standard fee system or scale in the Advisor business. Some Advisors work only for fees, much like lawyers. Others operate entirely or almost entirely on commissions. In-between are the larger numbers, who depend on a combination of fees and commissions. In some cases, the Advisor might partly credit commissions against the fee to encourage the client to buy insurance or other financial products through the Advisor’s company. An Advisor who feels confident of being able to sell a high-commission product might gamble on a low fee.

Unless you’re dealing with a fee-only firm, you can expect to get suggestions that you purchase an investment or insurance product that the Advisor sells. There’s nothing wrong with that, provided the product is suitable for someone in your financial situation and compares favorably with the scores of others you might buy elsewhere. However, you’d want to think twice about buying a load mutual fund when there are so many no-load funds available, for instance. And why buy the stocks recommended by the Advisor at a standard commission rate when you can use a discount broker? It’s up to you to decide whether the quality of the Advisor’s service is worth the price.

5. Check Working Relationship

Before you sign on, make sure you understand how often and with whom you will be interacting. Some Advisors have an initial upfront meeting and then check-in with clients once a year, while other Advisors provide ongoing support throughout the year to help with the implementation of a plan and coordination with other service providers, such as Insurance Agents, Mortgage Brokers, and Accountants. Beyond meeting service level, transparency matters as well. Ask yourself, does this Advisor make it seem as if my financial state is so complex I could never do it myself or does he/she suggests that everything can be simplified in an understandable manner?

In the end, not all Financial Advisors are created equal. A bad Advisor would cost you higher fees and taxes, and you’ll end up losing all your money. Take the time to research potential Advisors who can help you efficiently and effectively plan to reach your financial goals.

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Sleak Entrepreneur | Financial Consultant | Blogger


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