It is a common misconception that you have to be wealthy to benefit from a financial advisor. People who have more money certainly have a greater need for professional advice, yet everyone at some
point in their life can benefit from a good financial advisor. Events such as the death of a loved one, marriage, divorce, estate planning, saving for college and of course investments have the potential to become complex money events in life. Before you enlist the help of a professional financial advisor you should first consider the following tips to avoid regretting your decision in the future.
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Do your own research- The most common reason people regret working with a financial advisor is due to a bad experience. No one likes to lose money and if you have had a negative experience you more than likely want someone to blame. Unfortunately in some cases (not all) the negative experience could be avoided with some research before you work with a financial advisor. Talk to your employer, co-workers, friends and family for references. Once you have a list of possible candidates, research their work history and experience. Know what is is you need from an advisor to find the right match for your needs.
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Know your rights- When you hire a financial advisor to handle investments you as the investor have certain rights. By becoming familiar with your rights (Investor Bill of Rights) you can recognize when these rights have been violated. If you find your financial advisor has not worked within the scope of your rights, then you may have a case against your financial advisor.
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Understand the fee structure- To avoid confusion or conflict in regards to how much your advisor gets paid, make sure you understand the fee structure before doing business together. Financial advisors are generally paid in one of the following three ways: commission, fee based on assets or flat fees.
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When in doubt follow your instincts- Like other things in life, there are times we all get a certain “feeling” or gut instinct about a person or company. If you have doubts and are not 100% comfortable with the information you have learned about your financial advisor, you would be better off taking the time to find an advisor that you feel comfortable handling your financial affairs. Perhaps the financial advisor is not on the up-and-up or you might simply have a clash in personalities…in any event you should always feel confident that your advisor is working for your best interest.
Finding the right financial advisor can make the difference between having a trusted professional who will work on your behalf or paying someone who is not interested in anything more than making money (for themselves). Once you have found the right advisor make sure you keep the lines of communication open. You may be paying them to guide you on the right path, however in the end your affairs are your responsibility.
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3 users resposed " Tips To Avoid Conflict With Your Financial Advisor "
August 29 2009
That’s a good list of things to look at. I’ve found that the pure fact that it’s so easy to become an FA means there’s a definite need to screen your advisor.
Probably the easiest thing to look for would be if they are a CFP, or Certified Financial Planner. That just means that they have taken classes and they will be competent for the issues that face most people. The testing process for the CFP is fairly hard as well.
It’s also good to ask what types of funds they use, and if they use funds with 12b-1 fees or funds with high expense ratios.
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September 1 2009
Good suggestions, I would add two things:
1. Find an advisor who specialize in your needs. Most investors don’t realize there are advisors and planner who specialize in your needs, whether that’s employee benefits for a small business owner or lifetime income for a retiree.
2. Set all your expectations up front. How often do you want to be contacted? What kind of information do you want to see when you meet? Many advisor relationships are ruined because of simple broken expectations.
September 25 2009
Great advice. I agree with ‘financial planner’ that you want someone who specializes in your needs. Try to find a planner who is at about your same life stage so that they have a good understanding of where you are and where you want to be. For instance, I have two young children and my whole practice is geared towards new and expectant parents. I am highly tuned into the challenges that come with a growing family and can closely relate to my clients. On the other hand, I wouldn’t take on a client who is nearing retirement, since I don’t have as much insight to their goals and worries.
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