Financial advisors are people who make a living by helping you decide how to properly manage your funds and reach your desired financial goals. If you’ve never had a financial advisor before, then you’re probably just starting to realize how complex it is to successfully invest and save your money so that you maximize the value of your wealth. Because of this, it’s crucial that you spend a decent amount of time carefully choosing which advisor you’re going to go with.
Before you even start looking for a financial advisor, you will need to figure out whether you actually need one. For example, if you’re dealing with a huge life event like starting a business or getting married, then you should definitely consider hiring an advisor. Similarly, if you feel overwhelmed by money issues and think that you’re not able to juggle multiple different financial goals, then an expert can surely help you.
The first step to choosing the right financial advisor for you is to narrow down the financial field. In other words, you will have to choose one of the three basic types of advisors. The most common type is commission-based advisors. These are people who sell financial products like annuities, insurance, mutual funds. They include insurance agents, registered representatives, and brokers, and they get commissions on the aforementioned financial products.
On the other hand, if you need help with asset management or financial planning, then you should go with a fee-only advisor. Unlike commission-based advisors, they don’t receive any commissions on product sales, so you can always count on them to act in your best interest. These advisors make money purely through hourly rates, flat fees or a percentage of the assets they manage.
Fee-based financial advisors have become increasingly popular in recent years. Just like commission-based advisors, these people have a license to sell insurance or investments for fees. However, they also offer financial planning services for a fee. These people basically do the jobs of both fee-only and commission-based advisors.
“Apart from taking the different types of advisors into consideration, you will also need to examine your current financial situation before making a decision,” suggests Patrick Dwyer, a private wealth advisor at Merrill Lynch’s Miami office. One of the most important factors to consider is exactly how much money you have available for investing. For example, if you have more than a quarter million dollars in investable assets, then you will have many choices. In this case, most financial advisors will consider you a very valuable client and you will have a lot of option to choose from when it comes to who’s going to manage your funds.
With that being said, you should carefully examine every option. First off, you will need to check the credentials of every advisor. There are several different certification and licenses that an advisor can have. For example, if you’re thinking of hiring someone who is a Certified Financial Planner, then rest assured that you’re in good hands. Nevertheless, you should also do research on whether an advisor has any legal or ethical marks against them before you hire them. Of course, you should also check their previous work experience.
It’s also a good idea to determine how much help you actually need. Some people only need hourly consultations. You should go with this option if you have questions regarding a specific situation like selling a business or buying property. Financial advisors that offer hourly consultations charge an hourly fee and will often give you a cost estimate for their services upfront.
On the other hand, if you’re looking for someone to help you with asset management, you should search for a long-term financial partner. Asset managers will carefully manage and invest your funds. On top of that, they will always provide you with quality financial planning. You can also go with advisors that will help you with comprehensive financial planning. These advisors will create a one-time roadmap, which will help you reach your financial goals. They charge either a flat fee or an hourly rate for their services.