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Need a Financial Advisor? Here’s What You Need to Know Before You Hire One!

At some point, all of us are lost when we have to make financial decisions. Every decision you make engulfs you with a fear of what if it’s a bad decision. After all, you put your blood and sweat into making the money, the last thing you want is for it to go down the drain. If this seems all too familiar, don’t worry, you are not alone. Wondering what’s the right thing to do in a situation like this? Well, the answer is simple. Approach a financial advisor and seek help with managing your finances.

But how do you pick a financial advisor? Can you just go with the same person that your friend or neighbor hires? Well, the answer is no. Your financial situation, planning for the future, and expectations are way different from that of any other person, so your financial advisor should be someone who understands this and works in line with your financial decisions. So, here is what you need to know about hiring a financial advisor.

Understand the different types of Financial Advisors

There are different financial advisors, some are experts in financial planning, a few are good at retirement income planning, and a few others in investment advisory services. Understand what your wealth management goals are and find a financial advisor who matches these goals. Do not worry about how to find this out. The financial advisor’s portfolio should give you all the details and you would understand if their area of expertise is in the line you seek.

Brokers vs Financial Advisors

This is a common mistake that most people make. They confuse a financial broker with a financial advisor and use the term interchangeably. However, that’s not the right way to do it, because their roles vary significantly. A financial broker is someone who handles just one part of your finances, your investments. However, a financial advisor on the other hand handles your finances from end-to-end.

Even if a broker were to take up your financial planning, they would do so only if you are a high net worth individual with something around $5 to $10 million ready to invest. However, a financial planner will take care of all your financial needs from insurance to tax planning, to real estate, to investments. In short, they would be your one-stop-shop and can help you with long term financial planning. So, understand what you are looking for before hiring someone.

Look for Credentials

It is important for you to get along with your financial advisor. They have to be someone who is approachable and nice. However, that’s not what you should be looking at as the primary qualification. These traits only make them the ideal salespersons and not financial managers. So, make sure the person you hire at least has a designation of a CFP or a Certified Financial Planner.

Think of hiring a financial planner the same way you would look at someone you would hire for any other role. Prioritize their credentials over everything else. You can look up the credentials of your financial planner on The National Association of Personal Financial Advisors. This is a membership-only group that requires financial planners to continue their education and go beyond the basic qualifications. So, if your financial advisor is here, you have found the right person.

Understand what and how you are paying

Most financial advice is only fee-only. This means the financial advisor will only receive fees or payment for the services they offer to you and not a commission for the products or services they recommend that you should use. Other types of payment modes by financial advisors could be commission-based where they get their payments only from the commission they make for the products and services they recommend.

There is a third type where they get payments for their services and their suggestions. In other words, it is both fees and commissions and this is called fee-based payment. Understand how your financial advisor would be charging you and pick a model that you think would work best for you.

Jot down all the questions and concerns you have and make sure your financial advisor answers them. While they might not be in a position to disclose the names of their clients or share testimonials, they can always walk you through the kind of work they do.

Treat this like an interview you are conducting and make sure all your questions are answered. With these guidelines, we are sure you would be able to find the right financial advisor for your financial management needs.

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