6 Factors to Consider Before Choosing a Financial Advisor

If you think you need some professional assistance to get your financial house in order, then you’re going to have to put some effort into selecting exactly the right financial advisor. After all, you will trust this person with managing your money.

Here are 6 factors to consider before choosing a financial advisor.

1. Credentials

You’re probably going to want to hire someone who is a certified financial planner (CFP). A CFP has been through the equivalent of six college-level courses on subjects ranging from insurance, estate planning, financial planning, and investments.

CFPs, much like CPAs, are also required to pass a two-day exam. That exam has a pass rate of less than 2/3 (60 percent), so it’s not easy.

A CFP has a fiduciary responsibility to make the client’s interests a top priority. In short, you’re putting your financial future in good hands with a CFP.

2. Services Offered

Remember, there are many people who call themselves financial planners who only offer investment advice. If you’re just interested in investment advice, consider saving yourself a lot of money on a financial advisor and instead just visit one or more of the many financial advice blogs that are online. There, you’ll find a list of top stocks to buy that may or may not prove profitable.

On the other hand, if you’re looking for someone who can manage your assets, including your retirement accounts as well as various types of insurances, then be certain that the CFP you interview knows how to do that and has a proven track record with other clients.

3. Fees

Financial advisors aren’t running a charity; they need to be compensated for the work that they do.

Advisors offer various types of fee structures. Some of them are paid hourly, like lawyers. Others are paid based on the size of the assets that they manage. Still others are paid on a commission basis as they buy and sell securities. And then there are those who are paid based on a combination of those fee structures.

When you’re interviewing a CFP, be sure that you understand up front how much you’re going to be charged. You don’t want excessive fees eating into your net worth.

4. Check the Record

One or more boards, such as the Financial Industry Regulatory Authority (FINRA), a CFP board, or a state insurance agency, might govern the CFP you interview. Check with all of these boards to see if there’s been a history of discipline with the financial advisor that you’re considering.

5. Specialization

The CFP you’re interviewing might specialize in managing assets for physicians. That’s great if you’re a physician. However, if you’re not, consider searching for a CFP who specializes in managing assets for people just like you.

6. Investment Philosophy

You probably don’t want to have a financial advisor whose investment philosophy is different than your own. Make sure that you and your investor see eye to eye on the risks you are willing to take, types of investments to pursue as well as the ones to avoid.

Picking the right financial advisor could literally be the difference between poverty and wealth when you retire. Make sure you exercise due diligence when you’re shopping for someone to manage your money.