Financial advisor for your family will work the same way as a chief financial officer for a company. While hiring a conventional or online financial advisor, you want to make sure that you can work with them for many years. It can take some time to find the right firm or person. However, the wait is truly worth it.
These are a few tips that will help you find the best financial advisor.
1. Choose the right type
Financial advisors undertake several tasks. Some would offer only financial planning services, while others would provide investment management services. Others may offer income planning, but only for people nearing retirement. You need to know the particular type of advice you need while searching for the best financial advisor. Compare it with the services provided by potential candidates until you find a match.
2. Seek reputable credentials
You need to understand that there is a lot of difference between credentials. There are many organizations that acquire paid-for and easily obtained credentials so that their salespersons appear knowledgeable and professional.
Look for financial advisors with a PFS (Personal Financial Specialist) or a CFP (Certified Financial Planner) designation. You can also seek an online financial advisor with a CFA (Chartered Financial Analyst) certificate.
3. Know compensation methods
It is a good idea to know how financial advisors are compensated. There is no right or wrong approach here. However, unbiased and objective financial advisors tend to charge for their services on a fee-only basis. You need to know all potential ways compensation may be provided to make an informed decision.
This includes hourly fee, asset-based fee, hourly rate, and participating in commissions among others. Make sure you particularly understand the difference between a non-fee only advisor and one that charges a fee. Non-fee only advisors tend to get compensated through incentives or kickbacks from the company they are affiliated to. This may depend upon their objectives or sales goals.
4. Screen for criteria
You can use search engines to narrow down potential online financial advisors in your area. You can ensure they have an appropriate billing structure and the right credentials to meet your needs. Online searches can help find the exact kind of advisor you are looking for. There are many advisors that work remotely. Widen your search to pick a firm based on experience and credentials, rather than location.
5. Look for fraud risks
Fraud can be easy when someone else takes custody of your assets. There are many reputable financial advisors that use third-party custodians to hold their clients’ assets. You should be cautious when dealing with firms that offer in-house custody services. It is always better to work with someone that doesn’t directly hold your assets.
Make sure you exercise extra caution when speaking with firms and advisors that co-own investments they are recommending. This can be an investment in a particular asset, like a company. Look at Form ADV Part 2 to learn more about conflict of interest and ownership structure. This should be part of the firm’s disclosure statement.