No matter how much or how little money you have, the advice of a financial advisor could help. These five factors can help you sort out the good from the bad.
Financial advisors in bigger firms may work with a large roster of clients. Will you get the individualized attention you need to adequately manage your finances? If you don’t think so, consider someone who can invest the time you need and make recommendations tailored to you.
Find the right certifications
Between RIAs, ChFCs and CFPs, there’s a world of difference in licensing and experience required.
- A Certified Financial Planner (CFP) can advise every aspect of your financial life. This certification requires years of training and a board-standardized exam on the ins and outs of the financial world.
- A Chartered Financial Consultant (ChFC) license uses the same curriculum but does not require an exam.
- A Registered Investment Advisor (RIA) only offers investment advice.
Watch their payment method
There are typically three types of payment structures.
- No-fee advisors earn a commission for products and services sold.
- Fee-only advisors may get paid by the hour, from a fixed annual retainer or a percentage of the investments managed.
- Fee-based advisors may charge a general planning fee.
Look for someone with a fee structure that puts your needs first.
See how they talk to you
In the first meeting, good financial advisors will do much more asking than telling. They’ll want to know everything about your situation to shape a personalized financial strategy. An advisor who starts talking about products first may be more interested in selling high-commission products than in serving your financial needs.
See what process they use
Some financial advisors ask questions and use your answers to formulate a plan. They involve you in a collaborative process about your financial future. This kind of advisor can be preferable if you’re interested in actively managing some or all of your investments.
To get an idea of what style a potential advisor is using, talk to current customers about what they like and don’t like about the advice they’re getting. This is a great way to get a feel for the kind of advice you’re going to get.
Article provided by Local Government Federal Credit Union.
The advice provided is for informational purposes only. Contact a financial advisor for additional guidance.