Isn’t it funny that throughout your childhood you wanted to be an adult and when you finally did, you wanted to turn back the time? Well, it is the same story as most of us. Adulthood brings a lot of freedom and you can live your life as you wish. However, it also comes along with new challenges and responsibilities. While you are prepared to handle some, there are others you have no idea about. Managing your finances is an excellent example of the latter.
It is an unfortunate fact that although our education system prepares us to work and earn money, it doesn’t teach us how to manage it. The little that you may know about savings and investments is from watching our parents. Perhaps this is why most of you may feel lost when it comes to making important decisions regarding our money.
This is where hiring a financial advisor can solve your problems. They have years of experience and expertise in the field. With their help, you can understand which investment options can work best for you. However, trusting another person with your hard-earned money is not easy. Here is what you can do to find the right financial advisor for your needs.
Understand the types of financial advisors
You may be surprised to know that there are different types of advisors who excel in different aspects of money management. For instance, some advisors can help you with your financial planning. These advisors can tell you how much you need to save or what insurance may be the best for you. Then there are some advisors who have in-depth knowledge about investment planning. These advisors can suggest the best investment instruments as per your needs and risk appetite. Lastly, there are retirement advisors who can help you in building a robust retirement fund. They can advise on a host of options like 401(k), Roth IRA, taxes and pensions to help you build a desirable retirement fund.
Check the credentials
Certain financial companies introduce internal certifications and credentials. This is mainly a sales strategy to attract more customers by building credibility. To ensure that you are putting your money into safe hands, it is advisable to dig a little deeper. Look for credentials issued by trusted authorities. You can look for CFA or CFP certification or any other similar credential. Such credentials are an indication that the advisor knows the game. It is also important to note that obtaining a one-time certification is not enough. Since the financial industry is a fast-changing one, most advisors update themselves periodically. Do not hesitate in asking relevant questions about credentials. In fact, this should be your top priority when selecting a financial advisor.
Understand how the financial advisor is compensated
Now, this can get a bit tricky to understand. Most advisors will work on a fee-only or a commission basis. If you plan to invest for a long time and would require constant advise, you may consider this as it will be more cost-effective in the long term. Certain organizations compensate their financial advisors for selling their products to the customers. If this is the case, it is better to do more research before going ahead with the advice.
Check for complaints
In this well-connected world, you can easily check for feedback online. The most basic thing you can do is to run a search on Google. Treat any negative reviews as an early warning signal. Secondly, you can check the advisor’s record with FINRA or SEC. Generally, any kind of formal complaint will stay with the advisor’s profile for a long time. While one or two cases are fine, do not go ahead if there are too many complaints registered against the advisor.
Beware of fraud
Tricks and imposters are not unheard of in this industry. This is why you must exercise extra caution to protect yourself and your money. Try to avoid making your advisors the direct custodians of your money. Instead, go ahead with advisors who work with a third-party custodian to manage your assets. These advisors work with reputed companies to manage your accounts. This step will protect your money and you will always know what is happening with your money.