The Art Of Choosing The Right Financial Advisor

I love the smell of financial planning in the morning. To some its smells like a greasy breakfast of greedy financial advisors trying to sell you products you don’t need and skyrocketing costs that eat into your nest egg. To me it smells like the granola of a healthy financial future. However, this is not about our breakfast preferences, this is about choosing the right financial advisor that will help you prepare and execute a financial plan that will achieve your financial goals.

Firstly, you need to understand that there are different types of financial advisors with different financial planning skills and services. Some financial advisors assess every aspect of your financial life such as savings, shares, investments, insurance, retirement and estate planning including your will & testament and trusts. Others focus on a narrow range of investment products which sometimes are not securities at all.  

Secondly, when you hire a financial advisor you need to know what services you require, what services the advisor can deliver as well as the limitation on what the advisor can recommend. Additionally, you need to understand all the costs involved in the financial planning process. What services are you paying for, how much these services cost and how much the advisor is getting paid. If the advisor is unwilling to provide details about the financial planning costs it is probably because there is something to hide.

There are various ways a financial advisor can charge for their planning costs: some charge either a fixed fee for the planning or an hourly fee for the time it takes to develop the financial plan, but do not sell any financial products; some earn commission on the financial products they sell; and others use a combination of fees and commission. The way an advisor is compensated for their financial planning may have a direct impact on the advice provided. Those that earn commission face a conflict of interest and will inevitably steer clients toward products in which they have a vested interest. 

Thirdly, there is no standard educational or professional background qualification for financial advisors. Don’t be afraid to enquire about the financial advisors background, qualification and the organisation that issued the qualification. Do some checking, after all this is the person you will trust with your financial planning and future. Contact the issuing organisation and find out if this advisor did earn the qualification and if the advisor remains in good standing with the organisation.

So to recap, financial planning includes knowing exactly what you need; finding a financial advisor that is able to provide the services you require immediately and in the future as your goals change; and trust, gained though a rigorous selection process of understanding what services your financial advisor can and can’t provide, the costs involved and background checks. If you do your homework and select a financial advisor that focuses on your interest you should be on a good footing for a great future.