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Use These Benchmarks to Evaluate Your Financial Advisor

Financial advisors can guide you to having a suitable financial plan as per your goals. They aim to understand your current financial situation and offer customized solutions. With their expert acumen, they can recommend various savings, investing, budgeting, and tax strategies.

Since you work hard to earn money and fulfill your needs, it is important to exercise excellent financial control. You can have a firm grip over your financial situation with the aid of your financial advisor. Thus, it becomes important to be confident about the ability of your advisor.

The benchmarks listed below can help you with the evaluation of your financial advisor.

  1. Know your advisor’s background
  2. It may be advisable to do a background check before hiring the services of a financial advisor. Check for the advisor's name in the Investment Adviser Registration Depository (IARD). The IARD is a regulatory system for improving the governance of financial advisors. It also aims at making public the available information about various advisors. You can thus access the educational qualifications and professional certifications of an advisor. An online check can also help you understand the advisor’s licensing and behavioral history. Any disciplinary action is indicative of possible violations of rules and regulations.

  3. Understand the fees involved
  4. A financial advisor extends professional services in exchange for fees. These fees can vary from case to case and portfolio to portfolio. They may be paid quarterly or annually, depending on the decided terms. An investment portfolio requires customized solutions to match your financial needs. Hence, it is crucial to comprehend the nature of the services provided by the advisor. Professional services are not limited to financial planning or portfolio management only. They also include pension consultation, family office services, selecting private fund managers, amongst other things. You must also understand the periodicity and type of portfolio review services. It is important to review the need for an advisor to decide upon the nature of the services required. This ensures that you do not shell out more money by hiring any extra services. Furthermore, get a detailed breakup of the fees and other charges to help in ensuring payment towards only the hired services.

  5. Distinguish a sales pitch from advice
  6. A financial advisor sometimes receives a commission for the financial products sold. Therefore, some advisors may propose products of certain financial institutions for their personal reasons. It could thus lead to situations where the advisor faces a conflict of advice. Understanding the advisor's business associations with various financial institutions can help in gaining similar insights. You can efficiently tackle this by distinguishing between a sales pitch and financial advice. To start, be clear about your financial objectives, and thereafter, engage in a detailed discussion to know the features of the recommended product. You may also ask for an illustration of the anticipated returns. This aids in gauging if the advised financial product is in line with your financial goals. Hence, it is important to have a detailed understanding of the proposed financial solution. You must be convinced about your funds being invested according to your investment preference.

  7. Observe the quality of discussion
  8. The quality of your meetings helps in understanding the involvement of the advisor. Ideally, a detailed discussion across various parameters can be helpful. These include your financial goals and level of risk tolerance. This allows the advisor to make suitable recommendations. The advisor may also ask for and review the financial records that you have maintained in the past. Details about your current investments, insurance policies, and taxes are helpful too. This gives the advisor a holistic picture of your finances.

    The advisor may go through the data submitted and inputs shared and give views on your current financial situation. The advisor can also propose required revisions, supported with numbers and logical reasoning. A compromise on the quality of your communication could hint that the advisor is not a fiduciary. Non-fiduciary advisors may recommend financial products that fetch them a good commission. On the other hand, fiduciary advisors keep your interest as an utmost priority.

  9. Review the performance and accessibility of the advisor
  10. The performance of your portfolio depicts the performance of your financial advisor. A periodic review aids in knowing if the investment portfolio has the potential of meeting your financial goals. Financial goals can be categorized into short-term, mid-term, and long-term goals. Depending on the goal type, you must allow your portfolio a reasonable time to grow. Furthermore, you must not undertake the review on a standalone basis. It is important to take into account the existing trends in the market. A revision in governmental policies and various economic factors can also influence the performance of various investments.

    Apart from reviewing your portfolio, it is crucial to have easy accessibility to the advisor. It is not necessary to pay frequent visits to the professional's office, but the advisor must be available when required. The role of an advisor continues even after chalking down the financial plan. The financial market is volatile, so you may require consistent assistance and advice. Hence, it would help if you considered the timely availability of the advisor as one of the evaluation benchmarks.

To sum it up

Efficient and timely management of your funds can assist in achieving your financial goals. In addition to this, periodic reviews can also help in taking corrective measures for aligning your investments with these goals. It is thus important to have an experienced and professional financial advisor. The above-mentioned benchmarks can help you understand if your advisor is a fiduciary. You must also periodically assess the work of your financial advisor. This gives you the confidence of having the right professional to manage your hard-earned money.

If you are looking for some help with money management, you can reach out to financial advisors in your area.

William Hayslett

William is currently a member of the Paladin Registry Publishing Team. He comes from a diverse background of financial services and consumer relations Industry. William holds a Bachelor’s of Arts in Economics that he received from Allegheny College, with specialized coursework in finance and marketing. He has also earned state licensing for fixed annuities and life insurance, and has worked with advisors in the past on mutual fund and variable annuity marketing.

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