In looking for a financial advisor, there are a few things you want to keep an eye out for in order to make sure you find the right person.
In this post, we’ll explore some of those qualities a good financial advisor has so that you know you will be getting your money’s worth.
A Financial Advisor Should Be Well Read
At the most basic level, a good financial advisor should keep up with industry publications. This should include not only the kind that anyone can buy, but the kind that are only published for industry professionals as well.
A Financial Advisor Should Be Qualified
You would think this would be something that goes without saying, but a good advisor should be able to prove they have the knowledge required to do the job you hired them for. Believe it or not, there is no official designation. While accountants have the CPA and financial analysts have CFA, there isn’t anything required for financial advisors to be included in the industry. There is the CFP (Certified Financial Planner), but that isn’t a requirement and many people don’t know the difference between the different designations.
Why Qualifications Are Important
Requirements matter because when you’re looking for a financial advisor, you don’t want to get advice from someone who is only going to lose your money. They should be putting your money in the best products for your needs and goals.
In many cases, you will get very different advice on the same topic, which makes sense because financial advice differs from person to person. Still, there are some advisors who will rely on certain products instead of creating custom plans for their clients.
It’s for this reason that an industry standard should be established. With the many different areas of financial advice that exist, a person could easily make a career of being an expert in one and clients would be more easily able to determine just who would be right for their needs.
A Financial Advisor Should Have A Foundational Knowledge
All clients have different needs, yes, but advisors should have a basic knowledge that applies to everything. They should be able to explain things like active and passive management, how to handle retirement income, and withdrawal rates from portfolios for retirees, just to begin.
As a client, you can find this by looking for and working with a firm that operates on a fee-only or fee-based basis. That way, there’s less of a chance of product bias and you won’t have to worry about being steered in a certain direction so that advisor gets a better commission.
When looking for a financial advisor, you also want someone who is held to a fiduciary standard, which means they are obligated to act in your best interest. Don’t hesitate to ask questions about areas like experience, services, and fees, so that you are comfortable with what they will be providing to you. Your retirement will depend on it, after all.