Considering that Americans have accumulated more debt now than ever before, working with a financial advisor can be a great decision in planning financial expenses. A financial advisor can help with putting together a budget to avoid overspending, choosing the right investment strategy or prepare for taxes that come with running a small family business.
There’s no reason to stay in the dark when it comes to money and getting the best results requires the right financial advisor. But how do you find the right financial advisor?
Do They Understand Your Needs?
There is no one-size-fits-all approach to finances. There are solid strategies that will benefit most people – for example, paying down debt is almost always a good choice. But every individual has their own financial goals and needs. A 45-year-old father of two will need very different financial advice than a 23-year-old single professional who just finished school.
Look for a financial advisor who demonstrates an understanding of your situation. That way, they can offer advice tailored to you.
Does Their Education, Expertise and Certifications Align with Your Own Goals?
Maybe you’re trying to pay off student loan debt, getting your first mortgage or applying for a small business loan. These are all detail-heavy processes and you’ll get the best advice from a financial advisor who specializes in these processes. Evaluate the certifications a potential advisor has to see if they’re the right choice for your current and future goals.
Does Their Compensation Plan Incentivize Your Success?
You obviously pay for their service, but you might not be the only one paying a financial advisor.
There are many firms that offer their advisors product-based incentives; those advisors make a commission for selling the firm’s products to customers. Although this doesn’t necessarily make them bad financial advisors, it can create a conflict of interest and alter the advice they might suggest to you.
Don’t be afraid to ask a financial advisor about their compensation plan. Be careful with those that make money from sales; you’ll might end up wondering whether they’re recommending a product because it’s right for you or because it will make them money.
Can They Teach You?
Financial literacy is a gigantic problem for most Americans and very little is being done to solve the problem. What’s more troublesome is that the average person has more financial responsibilities than ever before. There are all kinds of ways borrow money including banks, credit unions and online lenders. It makes it easier than ever to accrue debt. Retirement no longer comes from pensions, Social Security may not be around in the future and people live longer than ever.
That makes it even more important to save money consistently and avoid debt. A financial advisor who can educate you on personal or business finances will help you save more and borrow less.
Do They Truly Seem to Care?
You don’t want your meetings with a financial advisor to feel like college lectures, but unfortunately, they often do. The advisor sees you as one of many clients, your money is just numbers added to a statement and they’ll simply go through the motions with you.
You might learn something from that type of advisor, but you’ll certainly have better results with an advisor who engages with you. Look for a financial advisor who inquiries about your current situation, your financial history, your goals and all the other important details about your life. When an advisor gets to know you as a human being, they can help you make the best financial decisions because they know your wants and needs in life.
There are plenty of excellent financial advisors out there and working with one could be the best decision you make to take control of your finances and improve your future. Be patient as you look for a financial advisor and keep those five questions in mind to ensure that the person you choose is the right fit and has your best interests at heart.
Guest post: Heather Lomax is a contributing writer from Financial Licensing Advisors. She regularly contributes articles to a variety of investment and finance blogs.