If you are getting serious about investing or managing your personal finances, it may be time to think about hiring a financial advisor. Before you take that step however, there are a few things to think about. It is vital to make sure that you are working with someone that is qualified to handle your money. By taking the steps to verify their abilities now, before you become a client, you can save yourself a lot of trouble in the future. Here are just a few questions that you can ask before you pick a financial advisor.
1. Do they work for a respected company?
While there is nothing wrong with going with a financial advisor that is self employed, there is more safety in working with one that is employed by a larger company. You'll have more recourse if something does go wrong, and these employees will normally have to adhere to a specific code of ethics in order to remain employed by that company. For those that are just starting out, this is probably the best financial advisor to have, since there is more security.
2. What kind of education do they have?
It's one thing to call yourself a financial advisor, and it's quite another to have the benefit of a solid education to back that up. Ask prospective advisors where they went to school and learn more about their alma mater before jumping in. Just remember, there is merit in small schools as well as larger well-known schools.
3. Will they provide you with references?
While financial advice is very personal, most financial advisors will be more than willing to provide you with testimonials or references. Follow up with these references and do your homework to make sure that their past clients are indeed pleased with their services. You can learn a lot about a financial advisor by the way that they treat their clients.
4. What is their financial outlook?
If you are interested in small investments and being cautious, a bull-like financial advisor may not be the best fit for you. It is best to find one that has the same financial outlook that you do to avoid confrontation and potential mismanagement in the future. This carries the same importance as their personality and can have a dramatic effect on your future business relationship.
5. Do they have a good track record?
Always run the name and phone number of a financial advisor through the Better Business Bureau to make sure that they have a good track record. While scam artists commonly change their name, it is still important to go through this step and do your own due diligence before you entrust someone with your hard earned money. Chances are, if they have burned someone in the past, there will be a record somewhere of their exploits. Check through local papers and online to see if you can find anything before you hire your new financial advisor.
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Originally posted 2008-11-25 05:18:28. Republished by Blog Post Promoter
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4 comments ↓
You omitted the most important qualification: Are the fee-only or are they compensated based on your investment selections or amounts?
Yeah, I agree with ToughMoneyLove, you need to find out how they charge. Other things to consider would be what is their service model, can you trust them, and are they personable. Most people don’t want to work with a jerk.
I understand your comment on having someone who is employed by a company providing greater security, but don’t underestimate the fact that a lot of times employees have quotas, sales targets and revenue goals they must meet in order to stay employed. Someone who is independent doesn’t have to worry about a boss hammering them to sell something.
I believe bullet number 5 is a big one when picking a Fiancial Advisor. You must do a thorough check on the Financial Advisors background. It’s sad to say but, you need to be extremely careful with your money these days. People are becoming more and more corrupted in today’s world. May I say Bernie Madoff!
While there are some good points in your article, there are several other key criteria investors should use for their screening and interview process.
1. Take referrals with a grain of salt. An advisor is only going to give you clients who are happy, not unhappy.
2. An advisor should be more than willing to provide investors with full disclosure related to how they are compensated. Anyone who won’t you give you written documentation is not someone you want to work with.
3. Advisors don’t have track records. The money managers they hire for you to manage your actual assets have track records. Don’t let an advisor tell you he/she has a track record unless they are actually managing the money for you (full discretion).
3. Dr. Len Schwartz (above commentor) hit the nail on the head. Investors really should consider having a background check performed on a potential advisor. After all, it’s only your financial future you’re turning over to them!
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