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How to Choose a Financial Adviser

Couple With Financial Planner

When you start looking around for a financial adviser, you’re going to quickly realize that almost anyone can call themselves a financial adviser, but not everyone who claims to be an adviser actually is one. Even worse, many financial advisers aren’t interested in protecting you or your money; all they truly want is to make a commission off you every time they persuade you to alter your investments.

So how do you choose a financial adviser? Here are specific guidelines that you should follow:

1. Make sure you know who you’re interviewing.

Insurance agents, investment advisers and stockbrokers can all claim to be financial advisers. But they all sell different things, and both agents and stockbrokers generally make their money from selling you specific products. Ask your candidate what kind of license they have and you’ll better understand what they’re likely to sell you, and therefore, better be able to determine if they will be able to give you what you need.

2. Ask what it costs.

Of course, you should find out the billing practices of any financial adviser you’re considering. Some financial advisers charge a commission on every sale they make off of you. And if you think about that, you’ll realize that means they’re motivated more by selling than they are by helping you reach your goals. Other agents charge a flat fee for their advice, which seems a better deal (but only if their advice is good, obviously.)  Also make sure to ask whether your candidate receives any compensation from third parties, as that will definitely influence what suggestions they give you.

Next, determine what the fees are going to be if you follow your candidate’s advice. Some financial advisers charge fees for opening retirement accounts or changing an investment. Make sure you get that information — and make sure it’s in writing.

3. Ask what your candidate’s approach is.

Different advisers have approaches that range from financially conservative to aggressively risky. Your financial adviser should be able to articulate their approach and offer specific examples of their practices using that approach. If they can’t do so, walk away.

4. Make sure you understand the services offered.

You need to check that your financial adviser offers services that match what you’re looking for, which can be tough if you’re not already certain what that is. It pays to do some research on your own first, at least enough to determine a general idea of what sort of investments you want to explore. With that research done, you will be able to ask specifics about the services of your candidate. And if the candidate attempts to pressure you into something you don’t want, that’s a big warning sign.

5. Find out who covers for your candidate.

Financial crises can happen at any time. What happens if your financial adviser is out of the country or on vacation in Hawaii? Never choose a financial adviser without knowing what will occur if they happen to be unavailable. Nothing is more frightening than not being able to control your money.

Above all, make sure that you get everything in writing. This is your money and your future; protect it at all costs.