FOUR QUESTIONS TO ASK A FINANCIAL ADVISOR

So, you are looking for financial advisor? Just before you commit yourself to any financial advisor, there are a few things you need to ask the person even after considering his portfolio and achievements.

How do you get paid?

There are many fee structures that financial advisors’ structure for themselves. It is advisable to target a fee-only advisor. This is so that you can keep the arrangement as simple and less-conflicting as possible. Fees only advisors might charge a percentage of the total amount of assets they assist you in managing, they could charge a flat fee (this is more like a wage) or they could charge per hour. However, it is easier dealing with fee-only advisors as compared to other payment structures.

If the charges seem a bit on the high side, you could settle for a low-fee robot advisor till your financial life grows in complexity and intricacy to the extent where you will require human assistance. 

What are your qualifications?

Financial professionals would approach you with a long tiring list of achievements (it’s all for the trade). Check out the Financial Industry Regulatory Authority’s FIRA professional designations database, there you will know what each one of those initials mean; if there are any educational requirements, if anyone accredits the designation, whether there’s a published list of disciplinary actions, and also if you can check their professional status.

Are you a fiduciary?

It is well known that fiduciaries do the work best to suit the interest of the client. For them it is the client first. Non-fiduciaries on the other hand, would recommend the best products particularly the ones that are suitable for you. The unseen side of it is that, the best and most suitable is rarely the economical. So, while they give you the best, you tend to ruin your finances on the long run to keep up. Think of it like you enjoying the value of your money. The sad thing is that the money might not be there for a long time if you stick to enjoying it. You really can’t eat your cake and have it after all. This is essentially why you want to know about the fiduciary rule and ask your potential financial advisors if they work by that standard.

Who is your custodian? Do you have one?

Just as you have hired the financial advisor, ideally, the financial advisor will in turn have to hire an independent custodian to stay in charge of your investments rather than act as a lone custodian. This is the safe way of ensuring and checkmating the veracity of your custodian. If he says that a certain amount is in your account, then you can as well just go online and double-check for if it is true.