What is a financial Adviser?
A financial adviser (or financial advisor) is a licensed professional who provides financial advice in a wide range of financial subjects. Those subjects include budgeting, investing, estate planning, retirement planning, risk management, taxation, etc. A financial adviser can help you take control of your money, get rid of your debt, save money, and build wealth. They can help you develop an investment plan, or help you plan for retirement, etc.
Understanding Financial Adviser?
A financial adviser (sometimes known as financial planner) is a licensed professional authorized to help you make major financial decisions in order to reach your financial goals. A financial adviser can help you set financial goals, such as saving for a house, getting married, buying a car, or retirement. They can help you avoid making costly mistakes, protect your assets, grow your savings, make more money, and help you feel more in control of your finances.
The advice can be a simple, focus on one aspect of your finance (for example, the best way to save for retirement). Or, what to do with a lump sum of cash. Or, it can be general advice, involving a comprehensive plan to help you set financial goals.
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Types of Services Financial Advisers Offer
Financial advisors specialize in different areas.
Retirement planning: Perhaps the best time you need to consider hiring a financial advisor is when you’re approaching or planning for retirement. It is so because a bear market could come just as soon as you retire leading you to lose most if not all of your money. Your investment portfolio may not be well balanced.
A professional can help you balance your investment portfolio, making it more conservative. That means allocating money to different stocks, bonds, mutual funds, etc. That way you don’t to stand to lose all of your money in a bear market.
Another reason why you need the help of a financial adviser is that you may outlive your money. The average life expectancy is around 90 to 95 years. So there is a chance you might live to 30 years after you retire at 65. A financial advisor can come up with a plan to help you generate extra income to prolong the life of your retirement portfolio.
Investing: Investing can be intimidating for most people. A financial adviser can help you with developing an investment plan. While sometimes you don’t need one to invest, but if you’re a beginner and don’t know what you’re doing, it makes sense to have someone with more expertise in the area.
A financial advisor can help you identify short term and long term investment goals that you alone may not have thought about. A short-term investment goal can simply be paying off your credit card bills to free up some money.
How to Find a Financial Adviser?
A financial adviser is not hard to find nowadays. You should do a thorough research when choosing a financial advisor. If you cannot find the best ones from your referrals, simply use your best search engine and type in “financial advisor near me.” And thousands of websites listing financial advisors in your local area will pop up.
But picking the right and best financial adviser can be difficult. That doesn’t mean your “financial advisor near me” search results won’t be helpful. It means that you won’t know which sites are more useful and it can be overwhelming to go through all of them.
Indeed, the best financial advisors are not hard to find; you just have to know where to look.
Alternatively, use the SmartAsset’s free matching tool to see nearby listings and find your financial advisor among the 3 financial advisor near you. Searching for financial planners or advisors near you is much easier with SmartAsset. You simply answer a few questions and the tool will match you with up to three (3) financial advisors in your local area.
Questions to Ask Your Financial Advisor
Asking a financial adviser the right questions at the first meeting will allow you to make the right decisions. Before hiring a financial advisor to help you with your financial goals (e.g, pay off your mortgage or save for retirement), you will want to know if they have the right experience, qualifications, and how much their advice will cost you.
Therefore, it makes financial sense to do your homework. It also makes sense to prepare a list of questions to ask a financial advisor before hiring him or her. Doing so will help you determine if the financial advisor is the right fit for your needs and situations. Here are the 5 questions to ask a financial advisor:
1. What are your qualifications?
One of the most important questions to ask a financial adviser is their qualification. You definitely want to know that, because everyone can call themselves a financial advisor.
Indeed, a well-qualified financial adviser should be a certified financial planner (CFP). CFPs agree to adhere to the CFP Board’s code of professional conduct. Therefore, they must disclose information about their background including any disciplinary actions against them like crimes, or bankruptcies.
Knowing that your financial adviser is indeed licensed to give you advice can put your mind at ease knowing that at the very least, you’re dealing with a professional.
To become a certified planner, one have to have a bachelors degree from an accredited college or university. They must also complete continuing education, usually 30 hours every 2 years. They must pass the CFP examination.
2. How Long Did it Take You to Get Them?
You should ask the financial advisor about the subjects they studied in undergrad and grad school. You should also ask the length of the courses. Any courses in economics, finance, accounting, or financial planning are desirable.
It’s also important to know the length of the courses they have done. The longer the courses, the more comprehensive the contents are.
3. How Do You Keep Up With Changes In The Industry?
A serious financial adviser should undergo ongoing professional development to keep up to date with current changes in the industry that might affect their clients. So you should ask whether they regularly attend seminars, conferences, training activities in their industries.
4. What are your experience?
Perhaps one of the best questions to ask a financial adviser is their experience. Indeed, a good financial advisor is someone who is very experienced. After all, you’re trusting someone with your money, so you would want to make sure they have the right experience.
Whether it’s retirement planning, investing or estate planning, it’s comforting to know that they have the experience giving financial advice to people who have similar issues to you. A good way to know if they have the right experience is to ask them about their typical clients. Were his clients seeking retirement planning advice or investing advice?
5. How do financial advisors get paid?
At the end of your first meeting with a financial adviser, you should have a clear idea of what their fee structure is. In other words, how much their service will cost you. It’s important because fees and commissions for the advice vary depending of the complexity of the advice. So asking them how do they get paid is an important question for a couple reasons.
First, asking so is crucial because you don’t want to end up paying any hidden fees. For example, mutual funds or investing in stocks, in general, involves some type of brokers’ fees. And these fees can eat away any potential returns. Second, knowing what a financial adviser charges for his or her services allows you to know whether or not you can afford their services.
6. What are your fee structure?
Financial advisors can charge you for their services in 3 ways: 1) on a fee-only basis, 2) on a commission basis and 3) on a fee basis. Each fee structure has their pros and cons. Again, it’s up to you to decide which one works best for you.
For example, on a fee-only basis, the financial adviser will get paid hourly and will also get compensated based on a percentage of your assets under his or her management. It can range 0.5 to 2 percent per year. This fee structure can be expensive, especially if you don’t do a lot of buying and selling of your investments.
However, with this fee structure, you can better estimate how much you will pay your financial advisor. With a commission based fee structure, the financial adviser get paid when you complete a financial transactions such as buying and selling stocks.
The good thing about this fee structure is that it can cost you less if you don’t do a lot of buying and selling. With a fee based structure, the financial advisor charges you a fee for his or her advice. They can also make a commission for a certain product they sell you.
The bottom line is you have to ask a lot of questions before you meet with a financial advisor so you can get the right advice for your situations
Work With the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
