3 Things To Look For In A Suitable Financial Advisor

Every individual wants to manage their funds well and grow them over time. But often, managing finances is associated with fear and skepticism. After all, poor financial decisions may wipe off a significant portion of your wealth. However, not all individuals have the knowledge and expertise to invest or take care of their capital on their own.  A question that often troubles investors is: Is it worth it to hire a financial advisor?  While most individuals may want professional financial guidance, they may struggle to hire the right advisor due to having multiple options available. In addition, you may need to assess the credentials of the advisor, carry out a background check to find out if the advisor has any prior disciplinary action taken against them, and more. Moreover, most clients are likely to have high expectations from their advisors in their money management services and investment expertise. If you need help with creating a retirement plan, choosing investments for your portfolio, or more, consult with a professional financial advisor who can guide you on the same. 

Is it worth getting a financial advisor for your specific financial requirements? If so, what qualities should one look for in an advisor?

To know the answer to all these questions, read on.

What should you look for in a financial advisor?

While it is important to choose an experienced and qualified financial advisor, you also need someone who understands your financial goals and gives you recommendations based on your needs. A financial advisor’s smartness is more about their experience, responsiveness, and openness with their clients than a university degree or certification.

Furthermore, for surety, you can ask for references and check with previous clients about the way they work. Ask questions – Do they communicate regularly to check on the client’s goals and explain the results? Do they tweak strategies based on changing goals or the performance of their plans? Have they navigated market volatilities successfully before? If yes, how and more. If a financial advisor is street smart and values you as a client, they are more likely to be sensitive to your financial needs and work in accordance to maximize your corpus, and will work towards protecting it at the same time.

Let us read more about how you can hire a suitable and qualified financial professional for your financial needs:

1. Engage with an advisor who specializes in the area you need help with

Are you confident about some aspects of financial planning but not others?

If yes, you can hire an advisor who specializes in the area you are not confident in. Choosing the services you need from your advisor is as important as knowing how much you want to invest. There are specialized financial planners such as retirement planning specialists, estate planners, certified financial analysts, etc., and you can choose one based on your requirements.

For instance, If you are looking for a financial advisor to chalk out a retirement plan for you, someone who specializes in estate planning may be a poor choice. When you decide to start looking for an advisor, it may be wise to analyze your needs intricately and then choose the best available option.

2. Hire a financial advisor who is confident in their practice and has sufficient experience

Smart, confident, and experienced advisors are a natural choice to opt for. But you need to learn how to differentiate between confident and overconfident advisors. While assessing financial advisors, overconfidence is a big red flag that you must look out for. Remember that their overconfidence is a risk to your financial health.

Experienced advisors know how to temper risk with experience and make their decisions carefully without rushing in. For instance, a smart and experienced advisor may be able to read the markets deeply and more effectively than others, thus directly benefiting you. Their legal advice can also be a game-changer to move you out of uncomfortable positions.

A financial advisor should be smarter than you only when they are out in the field and not when you wish to discuss something or seek advice.

3. Find out how your financial advisor charges a fee for their financial services

A financial advisor’s long-term success is determined by the commissions they make, fees they earn, and the clientele they have. It may be wise to understand how an advisor earns to make a better decision.

Advisors are bound by two sets of compliance standards in the industry – fiduciary standard and suitability standard.

Fiduciary advisors are legally mandated to act in the best interest of their clients. They may be fee-only advisors who don’t earn any commissions on their suggested investment products. Fee-only advisors may earn either a flat fee per visit or a percentage based on the asset under management. These are different from fee-based advisors who charge fees as well as commissions. Commission-based advisors, on the other hand, earn a commission when they sell a financial product to you.

Important Read: Difference Between a Fee-Based and a Commission-Based Financial Advisor

Should you consider employing a robo-advisor?

When assessing the skills and expertise of financial advisors, some may think robo-advisors are smarter than their human counterparts. The lower costs also make them an attractive option for investors. Artificial intelligence may equip robo-advisors with better analytics and improved capabilities to offer the right advice. So, is it worth having a financial advisor when you can take advantage of technology for the same?

There is no right or wrong answer to this question. One can choose between a robo or a human advisor based on the kind of help they require, the frequency of help, spending capacity, and volume of assets. Robo advisors make use of computer algorithms to make trades and work with very little human intervention. All one may need to do is input their goals, the corpus available, and other requirements. The algorithm may take care of the rest.

However, if you are looking for comprehensive financial planning that includes other aspects of your financial life, it may be better to take help from a human financial advisor. Also, one can never underestimate the benefit of having personalized advice that an advisor can offer that no AI or robo advisor can.

Many people also opt for a hybrid approach that involves using a robo advisor and hiring a financial consultant alongside to help with other aspects. Robo advisors may help with automatic buying and selling assets and rebalancing when required. However, they cannot offer personalized advice based on your financial problems. 

To summarize

Financial advisors primarily work to grow your portfolio by maximizing your returns. While choosing an advisor may be difficult, the suggestions discussed in the article may help you pick the right advisor who is not only well-qualified and experienced but has his ears to the ground and can protect you against market volatility. Remember to ask them the right questions and assess if they are the right fit for your needs.

Use the free advisor match tool to match with an experienced and certified financial advisor who will be able to guide and advise you effectively to meet your financial goals. Give us basic details about yourself, and the match tool will connect you with 1-3 professional financial fiduciaries that may be suited to help you.