Working with a financial advisor requires trust – after all, your hard earned money is in their hands. While an advisor’s role is to point your investments in the right direction, choosing a strategy for your money shouldn’t be a passive experience for you.
Here are a few key points to be aware of when choosing your advisor, and creating an investment strategy with them.
Choosing The Right Advisor
Choosing the right person for your portfolio is like making an instant, well-trusted friend. The person you select, after all, will be responsible for your financial future. For this reason, it’s important that you make the right choice. Here are four questions to ask yourself before choosing someone to work with.
1. How much do you know? If you’re seeking advice, your advisor’s level of expertise should be higher than yours. They should, in theory, be able to answer all of your questions. And if they can’t, there should be someone in-house that can help you.
2. How much help do you want? If you’re looking to learn, choosing a hands-off adviser isn’t the right choice. Find a professional who is capable and willing to meet your needs.
3. What are your goals? What are you looking to achieve financially with the help of your advisor? It’s important to understand your goals going in so you can clearly state your expectations to your advisor, and they can determine how to proceed.
4. Are you adverse to risk? When it comes to taking risks with your money, it’s imperative that you and your advisor are on the same page. If an investment presents the opportunity for loss, your advisor must ensure you are fully informed of the risks involved, and should not push you into any investments that challenge your level of comfort.
Assess The Relationship
Fast forward to several months after signing on with an advisor; let’s assume you are happy with your return on investment so far. But, is that the only indicator that you’re working with the right professional? Here are five more questions to pose when assessing your advisor’s performance.
1. Does your financial advisor take the time to explain the ins and outs of your investments to you? Does he or she fully explain fees and risks? If you want to be educated about your investments, it’s important that the person you’re working with is meeting those needs.
2. Does your financial advisor offer ‘unbiased’ advice? The person you choose to work with shouldn’t always offer advice that benefits them financially – if they’re affiliated with a lender and are paid commissions on the products they sell you, there may be additional motives behind the solutions they present. Ask yourself: does your advisor have more to gain from an investment than you do?
3. Does your advisor offer a full range of products? If you want a limited range of products, go with your bank. A professional financial advisor should be able to offer you a full range of products. If your options are limited, you won’t likely get what you need.
4. Can your financial advisor answer all of your questions? If not, you might not have the right person. Your advisor should be able to offer advice on a whole range of money-related topics, including health plans, personal tax questions, pension plans, tax implications, insurance policies. They might not know it all – and they don’t have to – but they should have someone within their company who can answer your questions. After all, you’re after your entire financial picture, not just bits and pieces.
5. Does your financial advisor just do what you say? Although this is nice, you’ve hired this person for a reason. If it’s expertise you’re after, how do you know you’re getting what you need when they’re in constant agreement with what you say? The fact is, you don’t. Basically, your financial advisor should listen to your needs, but shouldn’t be afraid to stand up to you if you make unwise decisions.