Spend the time to choose financial advisor to help with our financial and retirement planning. It pays big dividends to spend the time and to do the research in locating a competent investment advisor with whom we are comfortable and can trust.
Choosing a financial advisor is extremely important to our financial future. I will present a few key points to consider as well as provide a few links to resources that may be helpful.
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What is a Financial Advisor or Planner Anyway?
These folks specialize in guiding people in how to handle their money. This includes advice on investing, growing, and saving your earnings. Some advisors specialize, while others take a more general approach to financial planning.
For example, if your current primary concern is retirement you can find an adviser who specializes in estate planning and retirement strategies. If you are looking to make a large purchase such as real estate, you can locate someone who has such an emphasis on their work.
Choose Financial Advisor By Understanding the Types of Investment Advisors
Even though anyone can claim to be a financial planner, there are those who spend the time to educate themselves and gain some credibility.
For example, a Certified Financial Planner (CFP) has passed an exam about the details of personal finance and has also committed to continuing education. Even with this designation, they may still lack credibility and expertise. It is advisable to interview several CFPs and ask people for referrals.
What are the Fees for Investment Advice?
Financial planners either charge an hourly or flat fee or earn commissions on products sold such as annuities and mutual funds. Some planners may steer you in the direction of the highest commissions rather than what is in your best interest.
A good resource to locate Certified Financial Planners is the National Association of Personal Financial Advisors (NAPFA) which only lists fee-only advisors (no commissions from fund companies or life insurers). In many ways, the standards set by NAPFA even surpass the CFP credential requirements.
The Garrett Planning Network provides advice for an hourly fee on smaller projects so they are less expensive to use. This group is composed of Certified Financial Planners (CFPs) or those working toward that designation. This is a helpful source to get some questions answered without paying a lot.
Another type of financial advisor is a Fiduciary. This is a person who by law has pledged to have your best interest in mind when advising strategies and investment products. Other advisors are held to the “sustainability standard” which is much less strict. In other words, any product recommended just needs to be in the ballpark as suitable for you, and not necessarily in your best interest.
Since this is such a vital choice for people, it is extremely important to do thorough due diligence on any person you are considering hiring as a financial or investment adviser. Here are a few ideas.
For any Certified Financial Planner, you can verify that their credentials are legit and up-to-date by going to the CFP Board. You can also call the administrator of any designation as well to verify validity.
Ask for references from current clients. You can also ask the advisor directly if they ever have been investigated by any investment-industry group or regulatory body, regardless of the verdict. Also, ask if they have ever been convicted of a crime.
Look for Red Flags. If a person is bragging about investment gains from certain investment products, or they are making any sort of guarantees to be able to beat the market average, walk away.
You want someone who gives you good advice across a broad range of issues and not just investments. I always prefer someone who takes a more conservative approach and is more interested in preserving my portfolio through both good and bad times.
Choose Financial Advisor — Education is Key
Take your time and educate yourself in some of these areas so that you will be confident when speaking to potential advisors. There are many sources of good financial information both online and offline.
You want to be able to question any potential financial planner or advisor thoroughly as to their competency in order to reach your financial goals, while at the same time preserving your current wealth. You want an advisor who is interested in what is best for you and your family.
Choose financial advisor carefully so that you can work together on your specific timetable in order to reach your goals and achieve the type of current and retirement lifestyle that you most desire.
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