Do you know your parents’ financial advisor? Is he a family friend? Did he serve your parents for decades?
Wouldn’t you like to have one of these? After all, you have money that needs consideration and could use a steady, guiding hand. After all, one day you want to retire.
Chances are you know someone who has the perfect financial advisor. But such relationships don’t just happen. They are created through research and a thorough understanding of your financial advisory needs.
These 5 questions will help you find a financial match
To find a counselor who best fits your situation, you need to know why you need help in the first place. Then you can also ask the financial advisor a few questions. These aren’t necessarily the literal questions you will be asking, but you need to know the answers, whether you get them from the finance professional or search the internet or speak to another client.
# 1: why would you want a financial advisor?
Whether it’s an income increase, inheritance, or reaching the age at which retirement income needs to be taken into account, you have a reason or reasons to want a financial advisor. Ask yourself why.
Make a list. You will only find the right financial advisor if you know what that advisor should do for you. Whether it’s a retirement plan, budgeting for your child’s education, or a new interest in investing, your relationship with a new financial advisor will only work if it works for you.
Before you begin your search for potential candidates, find out what services you would like from a consultant first. Your personal needs will narrow your list of candidates and point you in the right direction when searching for candidates.
In addition to your current financial advisory needs, there is something else you should consider. Hope that financial advisor you find will be with you for many years to come? If so, consider the age of the person you are working with and finally ask them about their professional intentions for their own retirement. You don’t want to be let down and go through this process again.
Question 2: “Are you a financial advisor?”
Hah! This is a trick question! There is no such thing as a “financial advisor”.
At least not as far as that Securities and Exchange Commission is concerned. Absolutely anyone can describe themselves as a “financial advisor” as there is no regular definition of this term.
However, there are plenty of other terms that are in fact regulated, that take a lot of study (sometimes years), and come with all the cool initials you see after the names of the finance professionals you find.
While anyone can call themselves a financial advisor and get away with it, you want to find a certified financial planner. A CFP completes a 1,000-hour training course and must pass an exam offered by the CFP Certified Financial Planner Board of Standards.
Keep in mind that a CFP has worked hard to be able to offer their services and that you will (most likely) have to pay more fees to get those services.
In addition to their training and commitment to the job, the CFP must also be the Fitness standardwhich says they will always put their client’s interests first. Not all finance professionals adhere to this standard.
You can also seek out a CFA, a Chartered Financial Analyst who has worked as an investment professional for four years before he can even apply for his CFA certification. Here, too, you should decide whether you need this investment advice.
What you may need is a Personal Financial Specialist (PFS), a chartered accountant with experience in asset management and personal finance, including insurance, budgeting and investing. This can be more your speed.
Question 3: “Are there any complaints against you?”
The reason many people never hire a finance professional to help with their personal finances is because they fear being exploited or having their savings stolen outright. However, when you are ready to consider candidates for your personal financial advisor, you can find out if your candidate already has client complaints against them.
The website brokercheck.finra.org This option allows you to type the name of a financial advisor or provider into a search engine and see if the Securities and Exchange Commission has any complaints against that person or company.
It is a government authorized nonprofit that links to other websites to provide consumer information to keep them safe from rats that give financial advisors a bad name.
Question 4: “How do you make money?”
Not so long ago this question was limited to “fees vs. commissions”. This means the difference between paying an advisor for every action they take on your behalf and paying a commission for the investment products they sell to you.
Most financial advisors these days work on a paid system, but you need to determine what services you are willing to pay a fee for. Do you need budgeting, retirement planning, investment planning, educational finance planning? Each of these services comes with a price, and you should ask your advisor exactly how much each service will cost you.
Even better, a fee schedule may be posted on their website.
Question 5: “Are you listening to me?”
Surprisingly, this is a legitimate and the most important question.
Successful financial advisors work with dozens, perhaps hundreds, of clients and may believe they know what is best for their clients. What is right for one customer, however, is not necessarily best for another customer. You have already decided what your financial advisor should do for you, such as helping you prepare for retirement or saving up for the baby’s college education. Is he or she ready to do what you ask them to do?
If you want to limit your financial advisor to a certain role in your financial plan, they’ll accept that decision or try to sell you or push you into other services that you’ve already decided you don’t want right now or need?
When your financial planner is looking for investments for you, does he or she understand your risk tolerance? Is your financial advisor candidate taking “no” for an answer?
There may be other questions
After you’ve conducted an interview or two with financial advisor candidates, you may have more questions that need answering. It’s good! That means you know more about the process now than you did before and can make a smarter decision in the future.
Kent McDill is a seasoned journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.
This article originally appeared on www.thepennyhoarder.com