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Six key things to look for in a financial advisor

Whether you make a reasonable living or are fortunate to have enough wealth to invest, working with a financial advisor can help you get closer to the future you dream of. Finding a consultant who matches your needs requires some homework. You worked hard for your money and you want to make sure it’s in the right hands. That’s why it’s important to look into these six key things when looking for a financial advisor.

1. Research the Financial Advisor’s Background

Start with getting referrals from people you trust who might include your trusted circle of family, friends, and coworkers who are financially responsible. Also, think about any certified public accountants or attorneys in your contacts list who can offer a strong recommendation.

You want to have a good understanding of a financial advisor’s experience and credentials. The Financial Industry Regulatory Authority (FINRA) provides a free tool called BrokerCheck that shows employment history, certifications, licenses, and any violations that may have occurred. In 2016, FINRA started requiring firms to reference and hyperlink BrokerCheck on their websites.

Once you have a list of financial advisors to contact, call them and pay attention to their demeanor when they pick up the phone. Are they calm? Do they care? Trust your gut. After all, you’re talking to a person who’s going to influence the decisions you make with your assets. This is someone you need to get along with and they need to earn your trust.

2. Financial Services Should Align with Your Needs

There are many types of financial advisors. You want to make sure the services they offer and their portfolio of work matches your need. Some are solely financial planners while others offer integrated services that include investments, insurance, wealth, retirement, etc. Ask about the types of clients they serve. This helps determine if the advisor has experience working with people that are in your similar financial position.

3. First Consultation Is Not A Sales Pitch

Working with a financial advisor is a long-term relationship. The advisor should take a personal approach and treat the first meeting as a discovery opportunity. They should ask questions beyond your financial goals to get a better understanding of your life. Anyone who appears as a salesperson and makes promises about making you a lot of money is a red flag. As mentioned earlier, trust your gut. The next step is for the advisor to digest what they learned about you and prepare a strategic long-term financial plan at the next meeting. After that, they should give you time to go home and think it over before you sign on the dotted line.

4. Understand How A Financial Advisor Gets Paid

Ask your financial advisor how they’re compensated. It’s important to get a fair price for their advice since the payment structure will directly affect your investments. Here are three common revenue streams:

Hourly Fees. You pay an hourly fee for a financial advisor’s time spent managing your assets. This also includes time meeting with you, phone calls, and email communication.

Flat Annual Fee. You’re charged a percentage of the assets managed in a 12-month period. For example, if a financial advisor manages $500,000 in assets, and they charge a 1.5% fee, your bill is $7,500 at the end of the year.

Commission. An agent earns commission based on the services or products they sell, such as insurance, stocks, and mutual funds. Commissions can create a conflict of interest, and the agent should disclose all of the details regarding how they are paid for the investment. Work with a financial advisor who is a fiduciary and will put your interests above theirs.

5. The Difference Between A Fiduciary and Non-Fiduciary

Most people don’t know the difference between a fiduciary and a non-fiduciary financial advisor. It’s important to understand which category your agent falls into. A Financial Advisor who holds a series 65 or 66 license is considered a fiduciary and is held to specific ethical requirements. They have to meet a higher level of compliance and must serve in your best interest.

Fiduciaries will engage with you beyond finances and take a holistic approach to factor in your goals, hopes, and dreams as they manage your investments. Essentially, they’ll advise the best course of action for you regardless of how it affects them. A non-fiduciary financial professional may focus on only investments rather than an overall financial assessment. We highly recommended that you work with a fiduciary.

6. The Role of Technology in Managing Your Assets

Technology plays a vital role in the health of your assets. Ask your financial advisor what tools are in their arsenal to manage your portfolio. A lot of advisors use financial planning software that shows data in real-time for client management, financial planning, and risk assessment mitigation. They can run hypothetical scenarios that factor in milestones you may face over your lifetime, and forecast how it may impact your investments. The key takeaway is to understand how your financial advisor stays on top of financial trends and pays attention to the market’s ebbs and flows.

Financial Security with Rosevest Financial

Financial security is a constant struggle. It helps to have a coach in your corner to guide you. After all, the best athletes have coaches, too. Rosevest Financial is a multi-generational, family owned and operated financial advisory firm. We’re here to guide you on how to make your money stretch further through smart financial decisions and wise investments. Contact us to start a conversation about getting you on your way to financial freedom.

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