Managing money is usually something that people will give a high priority in their lives, but do not always know how. Not everyone has the working knowledge of personal finance that would allow them to do it. The costs of not managing finances properly will compound over time, and losing money becomes a real possibility. For some, it can be devastating.
On the other hand, managing your finances the right way can give you the opportunity to achieve your goals, reach for your financial independence, and be secure for the future. It doesn’t matter if you are already planning for retirement or are just starting out as a young professional: being prepared beforehand is the best way to be safe and get where you want to be.
In both cases, the best thing to do is to find a financial advisor to help out with this very important task of managing finances. Trained individuals that can advise you on how to get back on your feet or how to start planning, the right way. A financial advisor will take a look at your finances and create a strategy based on your financial profile.
From building credit, managing expenses, dealing with debt, saving money, and investing, a financial advisor can assist you in many ways. But since you’re dealing with money, it’s also very important to pick the right financial advisor, someone you can trust and that will actually help you. How to choose the right financial advisor becomes the number one question after someone decides they need help.
If you’re still looking for your financial advisor, then keep reading to learn what to look for in one, and how to make the right decision when the time comes to choose one.
Figuring Out What You Need
The first step is not to start looking for a financial advisor right away. Rather, you need to ask yourself why you need help from one in the first place. If you choose someone that can be of big help to your issue specifically, you are good from the start. But if you don’t know what you truly need from a financial advisor, it can be hard to find the right one.
It’s helpful to remember that financial advisors’ duties are not only about investments or saving money, but also planning your financial recovery and all other aspects of your financial life. There’s no point in seeking investment advice if you are suffering from debt problems. A good rule of thumb for knowing if you actually need a financial advisor is when you start accumulating assets (or debt). For example: getting your first job, after you buy a house, or when you decide it’s time to stop working.
Also, depending on your own unique situation, the advice you need may differ. In other words, the type of financial advisor you need depends on your unique situation. But that’s the easy part of all this: you probably already know what you need, even if you don’t have all the information laid out in front of you. To help you with that, here are some of the services a financial advisor may offer you:
Financial advisors’ duties
Tax strategies – advice and strategies to decrease the amount of tax you pay.
Investment advice – depending on the level of risk you are comfortable with, the financial advisor can give you a lot of different investment options and build up your portfolio.
Dealing with Debt – financial advisors can work on a plan for repaying the outstanding debts you have.
Setting Budgets – financial advisors can figure out where the money is going, how you can save it, and help you set out a budget plan so you can reach your goals.
Retirement planning – setting long-term goals and maintaining the lifestyle you want requires careful planning and consideration of your finances, which a financial advisor can do for you among other things.
Those are just to give you a general idea of what a financial advisor can offer you, so you can better choose one. In addition, financial advisors can help you maintain your calm during difficult times. So you need a professional you can count on to know where you stand with your finances. Financial advisors will let you know if there’s a reason to worry or not. And if there is, they will also figure out what action to take. Factor this into your search for a financial advisor, and find the one that understands your point of view too.
General Things to Look For in a Financial Advisor
Before we dive into the specifics of what to look for in a financial advisor, there is some general information you should consider once you found a financial advisor that you are interested in contacting. Some of this info is very obvious, such as figuring out if the financial advisor is honest and transparent. Since you are dealing with money, it’s always important to be sure in that regard.
Another thing to consider is the level of education of the financial advisor. It is also important to know how experienced the financial advisor is – plus how successful they have been in their careers. However, that is not to say you can’t pick a financial advisor with fewer years of experience under their belt.
The best way to determine the experience level of a financial advisor is to know about their track record and success stories. It’s important to know if they have enough experience to be able to handle your case or not. In some cases, a financial advisor starting out can be of great help. But in other cases, you will need the help of someone with a lot of experience.
Another very important thing to consider is knowing their registration status. Financial advisors can be certified and registered with many different organizations, accredited or otherwise, depending on where in the world you are. Most places will demand that financial advisors be registered in a financial institution or be certified as financial advisors. Look for the financial advisor’s credentials to see if they have the relevant designations or are affiliated with the right professional groups.
The last thing to consider is to know what is the fiduciary standard of the financial advisor. Being a fiduciary means that the financial advisor must act, according to the law and best ethical principles, in their client’s best interest. So, before you choose your financial advisor, check to see if they are bound by the fiduciary duty or not.
How Financial Advisors Earn Money
Before choosing a financial advisor, you must decide how much are you willing to pay for one. It’s a crucial step to help you choose the best financial advisor for you, and it can’t be avoided. So, figure out how much money you want (or can) spend on the services of a financial advisor.
Now that you’ve determined how much money to spend on a financial advisor, it’s important to know how they make money in the first place. This way, you can decide what is the best option for your budget. There are two main ways that a financial advisor can charge you for his or her service. They are called fee-only or fee-based financial advisors, and commission-only financial advisors.
Fee-only financial advisors charge directly for their services. This means that they do not earn commissions for financial products or services that they recommend to their clients. This means that a fee-only advisor will charge a set amount as compensation for their services. And that can be a flat rate, hourly, or a fixed rate. The rate is usually calculated using a percentage of the client’s assets under management.
Commission-based financial advisors, on the other hand, earn money entirely on the products they sell or the accounts that are opened. This means the more accounts they open or transactions they complete, the more they make money. Commission-based advisors can sell products such as mutual funds and insurance packages.
The last thing here is to always remember that you are in control of your money. The decision lies with you alone. If a financial advisor is really pushing for a product, make sure to know if they are a fiduciary or not. This article explains the difference between Fee-Based vs. Commission-Based.
Conclusion on Choosing a Good Financial Advisor
Before you finish with your search, remember one last piece of advice that will help you choose the ideal financial advisor: be confident with your choice. If you are not confident in your choice, even after all the research you did, start over. You must be confident that the choice you made is the best for you, especially when considering that this could be a long relationship.