At a certain point in my 20s, I finally felt I was “adult” enough to work with a financial advisor. I had questions I just wasn’t comfortable trying to answer myself. Until that point, I didn’t really have any money, so I assumed there was no need for one! However, after having worked with a financial advisor, I wish I would have started the process sooner. It’s been vitally important to my financial well-being. Working with an advisor helped me get out of debt, start saving for retirement and sort through important tax questions. It’s a big decision to trust someone with your money, so here are three things to consider when choosing a financial advisor.
- Figure out what services you need. Are you deeply in debt from student loans? Are you wondering how much to contribute to a 401(K)? Are you considering starting a college fund for your baby? Do you simply need help with managing your monthly cash flow? Knowing what you want out of the relationship will help you decide on the best person for the job. A good financial advisor will help you look at the whole picture: budgeting, saving, insurance, estate planning, tax planning and investments.
- Check out qualifications and references. Ask trusted friends who they see for money matters, and ask if they’ve been happy with their experience. Get a list of names and do your due diligence. Discover their qualifications. In the financial planning world, the minimum standard is the Certified Financial Planner (CFP) designation. The word “advisor” may encompass brokers, wealth managers and financial planners interchangeably. So make sure and find out if they are held to a fiduciary standard. That requires the advisor to uphold a standard of service that requires the clients’ interests always take priority. Schedule a meeting with the top candidates and ask questions. Do you understand the language your advisor is using? Are things being explained clearly so you comprehend exactly what is being discussed? If your advisor is not breaking things down so you can understand it, you may need to search for a better fit. Additionally, ask if the planner will be the only one working with you. Some planners have others in the office assist, so you may want to meet everyone who will be working with you.
- Find out how the advisor is paid. You need to be very clear about what you’re getting, and how you’ll be paying for it. If you need help with debt payments, setting up a monthly budget or purchasing investment products, prices will differ and you need to know how your advisor is paid.
Money matters are complicated! You seek a doctor’s advice for your physical well-being, so it makes sense to seek the advice of a financial advisor for your financial well-being. If you know exactly what you want from an advisor, select someone who puts your interests before his/her own and understand how your advisor is compensated, you’re on the right track!