What You Need to Know When Looking for a Financial Advisor

by jackliu@theedgeleaders.com - 3 min read

What You Need to Know When Looking for a Financial Advisor

by jackliu@theedgeleaders.com - 3 min read

by jackliu@theedgeleaders.com

Planning to retire? Just bought a new home? Need to start thinking about investing wisely? It may be time to hire a financial advisor. Here’s how to make an informed decision about hiring the ideal advisor to help you reach your financial goals.

Trust Word of Mouth

When it comes to your finances, you want someone on your team who is trustworthy and has good references. Talk to friends who are working with an advisor or have employed one in the past to guide them with their investments, especially friends and acquaintances with financial goals similar to yours. Couple these referrals with your own research and get an idea of their online and social media imprint to see if there are any irregularities or records of any unlawful practices in their history, or any other red flags.

Get to Know Them

Now that you’ve narrowed your list down to a few advisors that meet your requirements in terms of credibility, experience, and reputation, it’s time to meet face-to-face and assess whether you and your prospective advisor are a good fit. This part – actually meeting the person who will potentially manage your money or coach you on how to do it effectively – is the most important step in the process.

“I am still stunned at the number of [Bernie] Madoff clients who never, in fact, met the guy,” Eleanor Blayney, CFP and president of Direction$, LLC, told Forbes magazine in 2009. The best way to assess a potential advisor is with focused questions on specific topics, like how they have helped their existing clients, and what their outlook on your financial needs is. If you feel that the advisor is open to your ideas and wants to work with you, that’s a good sign. If they appear to be pushing their own agenda before even knowing what your needs are, it’s probably best to pass.

Specify Your Service

When taking on an advisor, be clear with them as to the nature and frequency of the services you require. Be aware of fee and commission structures; they might bill you hourly or charge a commission or a trading fee for buying stock for you, or they might charge a percentage based on the value of the assets they manage for you. If you’ve chosen a reputable and vetted professional, you shouldn’t encounter payment problems, but be aware that some advisors may be motivated by a high commission and therefore urge you to invest in a certain manner, or those on a salary might promote specific products and services to you. But if you and your advisor lay all your cards on the table before entering into a deeper contractual relationship, you have nothing to fear.

Have a Checklist

Before you sign on the dotted line, evaluate your potential advisor with a thorough checklist that should look something like this:

  • What are their educational qualifications, certifications, and professional experience?
  • How long has the establishment they work for been in business?
  • Are they or their firm registered with a securities regulator?
  • What products and services does their firm offer?
  • Do they have a goal-focused financial plan in mind for you?
  • What will be their fee and method of payment?
  • How often are you expected to meet, and will you work collaboratively?

When you have all your notes from interviewing a few advisors, compare and contrast their responses before you make a decision. Time is money, and for something as important as a financial advisor, you should take all the time you need to make sure that you have the right person in your corner.

Industry Links

The following organizations can be good places to start searching for more information on the financial planning industry:

In Canada, the Financial Planning Standards Council develops, enforces and promotes standards for financial planning in Canada; the Financial Advisors Association of Canada has information on designations of financial advisors; and the Mutual Fund Dealers Association of Canada is the national self-regulatory organization and representative of firms that sell mutual funds in Canada.

In the US, a CFP has passed a rigorous test administered by the Certified Financial Planner Board of Standards about the specifics of personal finance; and planners at the National Association of Personal Financial Advisors are fee-only, which means their only revenue comes from their clients.

Baisakhi Roy | Contributing Writer

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