One of the most difficult and crucial decisions you’ll ever make for you and your family is choosing a financial advisor. Your income bracket is irrelevant to this decision, because even if you’re on the lower end of income earning, you can find stability and long term security with the right financial advisor. On the other hand, even if you’re on the higher end of income earning, you can very well be completely unstable and worrying about your financial security in the future. Someone much wiser than I once said, it’s not about how much money you make, it’s about how much money you save. That’s where a financial advisor comes in, a mentor to guide you to your ideal financial future.
Reading some great books like, Rich Dad Poor Dad by Robert T. Kiyosaki or Chicken Soup for the Soul by Jack Canfield and Mark Victor Hansen, will give you some encouragement and inspiration to get started. These types of books also teach us about principles in dealing with money, but they do not get into your own personal situation, nor do they give you guidelines or alternatives for you to plan in the future. So, after reading and researching about how to deal with money, I personally, highly advise you to look for a like-minded individual that will make you feel comfortable dealing with your money and your future.
A Certified Financial Planner will give you an instant sign of credibility. However, it doesn’t guarantee credible results. Start by asking someone you know about a financial planner, someone in the same stage of life as you currently are in - if you’re married with children, ask someone that is also married with children. The goal is to find a financial advisor that has had previous success with clients in the same boat as you are currently. Don’t be scare to cross that bridge, and ask as many personal friends you know to receive as many possible names for you to choose from a list.
Once you have a few names, look into financial planners that are fee-only, meaning their only revenue comes from their clients. Fee-only financial advisors do not accept commissions and pledge to act in their clients’ best interests. Don’t be surprised if these type of financial advisors, not only meet, but surpass the requirements needed for a CFP accredited financial planner. You may also be able to find an hourly fee financial advisor, which is great if you only have a few handful of questions. If you’re starting out and don’t have a great amount of assets, an hourly rate financial advisor may be your best bet, when your needs are fairly basic. But not necessarily ideal if you’re looking for a long term business relationship for your financial stability.
Lastly, look up your State’s CFP Board’s public disciplinary record. Ensure that the individual you are considering to hire has not had an official complaint summited to the CFP Board in the past.
Consider avoiding commission-based financial advisors. These type of planners have less than altruistic incentives to direct you in a particular life insurance package or mutual fund if they’re receiving a percentage of the revenue. Not to say that fee-based planners are perfect, if they are earning only 1% of your annual assets, these type of financial advisors may be reluctant to encourage you to liquidate your investments or buy a big home. Fee-based advisors would be reluctant because their fee would shrink, even if those moves would be the right moves at a particular time in your life.
On the other hand, hourly-based financial advisors are typically building their business, and will normally rely on your recommendations to grow their practice - you may get great service for this reason. But don’t hesitate to ask an experienced financial advisor whether they would accept an hourly rate, it is my experience that financial advisors like doing simple hourly rate projects with younger clients that can only afford to hire someone at a particular rate.
There are many other specific questions to ask a potential financial advisor, but for now simply try to do some research and ask your colleagues for some names. Once you have the short list of names you want to interview, do the background check on them, along with googling on the Internet for their name. Than go ahead and sit down with them to find out their pay structure, investment approach, along with how much contact you’ll need to have with them. The answers with vary substantially from one financial advisor to another, but it doesn’t matter, you’ll be able to choose who is right for you.
I hope this articles serves its purpose to get you started on choosing the right financial advisor that you can develop into a long term business relationship. The goal is for you to feel as comfortable as possible with your decision and receive future financial stability and security for you and your family. The last thing to remember is to never say, I don’t earn enough. You can never earn too little to get financial advice, because it’s not about how much money you earn, it’s about how much money you save.
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