It’s time. You’ve decided you’re ready to enlist a professional who can manage your finances and grow your money. You’re prepared to hire a financial advisor.
So what now? How do you find that perfect partner? What qualities should that expert have . . . and what are some red flags that should send you running?
If you’re looking to sign on with your own financial advisor, ask these five essential questions before you close the deal.
Question #1: What Am I Paying For?
Every advisor is different, so start by looking at what services you receive when you hire a given professional. Are you simply being set up with a one-size-fits-all portfolio? Or are you getting personalized advice, one-on-one-meetings, a custom-built portfolio and periodic rebalancing?
At the same time, look for someone who can work with you—or point you to trusted colleagues—across the entirety of your financial life. You’ll want your advisor to maintain a big-picture view of your goals and progress.
So seek out a professional who understands the MindShift.money philosophy, can deal knowledgeably with your investments, estate planning, insurance needs and more.
Question #2: What Are Your Skills And Credentials?
Just about anyone can call himself a financial advisor, so make sure that your chosen professional has a respected certification to back up his expertise.
In particular, look for a Certified Financial Planner. Becoming a CFP obligates your pro to undergo extensive classroom and experiential training, pass a rigorous exam covering a breadth of financial areas, meet continuing education requirements and adhere to a strict set of professional and ethical standards.
Also, find out whether your advisor’s area of experience matches up with who you are. If you’re young and just starting out on your financial journey, you probably won’t want an advisor whose clients are primarily wealthy, older business owners.
Question #3: Can You Show Me Your Fee Schedule?
Worried about conflicts of interest and commissions? Get yourself a fiduciary advisor.
A fiduciary has a legal obligation to treat your financial interests as paramount. That means the advisor must recommend the best investments for you—not the ones that offer her the best commissions. Plus, she’s required to disclose any conflicts of interest to clients.
In the U.S., the Department of Labor’s Fiduciary Duty Rule is intended to assign critical fiduciary duties to a breadth of financial professionals. While that rule was initially scheduled to go into effect in 2017, its rollout has been delayed to mid-2019. So, for now at least, it’s up to you to verify your advisor’s fiduciary status.
While you’re talking pricing, confirm that the fees you’re paying for money management are capped at no more than 1%. Otherwise, you’ll find that your gains are eaten up by the cash you’re paying for advisor services, fund management and commission costs.
Question #4: What’s Your Availability?
When you choose a financial advisor, you’re looking for someone who will be part of your team. You’re paying them to manage your hard-earned money.
And a member of your team shouldn’t be too busy or too important to deal with you. So find out:
- What can you expect in terms of updates and communication from your advisor?
- Does she go out of her way to schedule regular in-person meetings or phone calls with you?
- Does she allow you to request meetings in order to receive updates or address new developments in your lifestyle?
- How far in advance do you have to schedule a meeting? A few hours? Two days? A week?
- Is she available by E-mail for quick updates or questions?
- When you do want to talk to your advisor, will you actually be able to speak with her, or will you be handed off to an automated support line, a call center or the intern?
Question #5: What’s My Gut Telling Me?
Naturally, you want use objective data—like credentials, fees, etc.—in evaluating your advisor candidates. But, once you’ve checked off those boxes, examine the less tangible but critical criteria:
- He uses words that make sense to you. If your advisor speaks only in acronyms and financial jargon you don’t understand, run. Don’t entrust your money to someone—no matter how impressive he seems—if that person can’t speak about your finances in plain language that you can understand. Before you make any move with your money, understand exactly what you’re doing and why.
- He sees you as an individual. Don’t sign on with an advisor who bases his recommendations for you solely on your age or income. If your finances and dreams looked the same as all of your peers’, you wouldn’t be seeking personalized advice. Instead, listen to the way your advisor talks to you. He should ask questions that nail down your lifestyle, goals and priorities—especially in terms of your focus on investing for Cash Flow. And he should be able to articulate why his recommendations are best for you.
- He treats you with respect. Again, your advisor is a member of your team—someone you’ve hired to manage your finances. So steer clear of any professional who speaks to you with condescension or expects you to accept his advice without question. Look for a knowledgeable expert who willingly explains and teaches along the way.
image credit: Bigstock/Daxiao Productions
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.