- Fiduciary: Make sure your financial advisor is a fiduciary. What is a fiduciary? Someone who is legally obligated to act in the best interest of their clients. Providing impartial recommendations is what allows financial advisors to manage your investment portfolio with your best interest at heart. Not all advisors are required to maintain this standard so be sure to ask.
- Fees: How does the advisor make their money? This can make all the difference in the quality of service a financial advisor can give. It's important to question their motivation to make certain recommendations - ask yourself if the advice that they are giving is motivated by commissions. The "fee-based" platform is the most advantageous for the investor (you). In a fee-based arrangement, the advisor charges a percentage of your assets per year. This removes any conflict of interest and motivates the advisor to grow your assets without recommending inappropriate investments. The financial industry is a complex one and it's important to make sure that there are no hidden fees that you are unaware of. It's ok to ask the advisor that you're interviewing - they'll tell you.
- Communication: What will your communication be like with your advisor over the course of your relationship? Prompt and reliable access to your financial advisor is ultimately a question of trust. You should always be able to get a hold of the person that you've entrusted with your investments. Regular meetings by phone and in person to review your accounts is a great way to stay in touch with what's happening with your money. For a better idea of what a good picture of communication looks like, click here.
- Investments: Is the advisor able to clearly articulate their investment process so that you can understand it? This is usually a good indication of the transparency and competency of an advisor and their process. You should understand where you are investing your money. Is the investment appropriate for you and your particular risk tolerance? Do you know if the investment is liquid? Are there hidden fees associated with the investment? Do you know what the taxable consequences are?
- Independence: An independent advisor is one that can offer investment products from the whole of the market. This means that they can provide impartial investment counsel because there is no link or allegiance to any proprietary products. Bottom line: assure they are independent - Ask if they are a registered representative of an independent broker dealer.
- Regulatory: Are there any FINRA complaints against the firm or individual advisor? Many clients and individuals have complained about financial advisors, and FINRA makes those complaints public. To find out if the financial advisor you're considering working with is the subject of any complaints or more serious issues, check out the BrokerCheck tool on FINRA's website by clicking here.
Finding the best financial advisor for you can change the entire outcome of your financial future. Know what questions to ask, know what to look for, know your advisor.
When looking for a financial advisor, it can help to learn about the distinctions between different professional focuses. In other words, understanding the difference between a financial advisor, a wealth advisor, a financial planner, a financial consultant, a wealth planner, a retirement specialist, etc. can be helpful in determining the right relationship. If you'd like to learn more about the differences of types of financial advisors, check out the blog post we wrote about what "Wealth Management" is. Click here to check it out.