Choosing a financial advisor is an important decision. Finding a trusted firm to assist you with your financial future, retirement questions, and investment options is not something to be taken lightly. With so many financial advisors who represent insurance and brokerage firms out there, it may be difficult to find a financial advisor who will offer you the best advice without pushing products just to make their commission or bonus. According to current regulations there are a variety of individuals who can tack the title to the end of their name. Unfortunately, that doesn’t necessarily mean they are operating according to fiduciary standards and offering the advice best suited for your financial future. What can you do? In this article, we are going to cover the two foundational questions you should ask anyone who you are considering as a potential advisor. Of course, these aren’t the only two questions you’ll need to ask, but if your advisor can’t get past these two, you will probably want to look elsewhere for your retirement and investment advice.
Two Most Important Questions for Your Financial Advisor
- What are your credentials? By asking this question first, you’ll have an idea if your potential financial advisor is working on behalf of an insurance broker or other firm that is representing or pushing financial products. Depending on the area you are residing, the credentials to look for may vary. Let’s say you life in the UK and are looking for a financial advisor in Manchester. You should look for a planner who has achieved a Diploma in Financial Planning (DipPFS) at the minimum, and a financial advisor who will act as a fiduciary, placing your financial well being first.
- How are you paid or compensated for your services? If you are going to work with an individual or a firm who will be handling all your finances, it is vital for you to be aware of the way your financial advisor is compensated. According to 2011 surveys that were given to investors, an alarming number were not aware of how their financial advisor was compensated and some even assumed their planner provided financial advice free of charge. Let’s say you are looking for a financial advisor in Manchester, since that is the area in which you reside or work. If you choose a representative of a local Manchester insurance company, for instance, chances are high that he or she works on a commission basis and will be quick to include the fact that you should purchase life insurance from his company as part of your financial advice. This of course, is a conflict of interest, since the financial planner is employed with the insurance company. Don’t fall for these traps. Instead, choose a financial advisor in Manchester whose sole purpose is to provide financial direction, investment advice, and retirement planning services. By choosing a planner who is not directly employed with a broker/dealer you’ll receive unbiased, conflict free advice.
Of course, as mentioned above, these are not the only two questions to ask a potential financial planner, but they are the foundation of a solid and trusted relationship between an advisor and an investor.