There’s a lot to know about investing, so it’s a good idea to get some professional help. But with so many financial advisors out there, how can you choose one that’s right for you?
You may have to interview several prospective financial advisors before deciding on one. When you talk to them, see if you can get a sense of how they might work with you. Specifically, try to answer the following questions:
Does this financial advisor:
Understand you? Perhaps above all else, you want a financial advisor who will take the time to get to know you and your family, your goals and what’s important to you.
Clearly explain investing? Once you enter the investment world, you will likely be curious about it. Why is diversification important? What’s a market correction? How do interest rate movements affect different investments? You will want to work with someone who will make the effort to educate you on investment topics and answer all your questions.
Know your investment style? Obviously, you’ll want someone who will recommend only those investments that are in your best interest and that can help you make progress toward your goals. Therefore, the person you choose needs to understand your investment personality — that is, whether you are an aggressive, moderate or conservative investor.
Have a certain investment philosophy? You may have your own investment style and preferences and so do many financial advisors. In fact, some financial advisors have an overriding investment philosophy that governs many of their recommendations. You need to find this out before you start working with someone.
Communicate frequently? The most knowledgeable financial advisor in the world won’t be of much help to you if he or she is not a good communicator. You need someone who will regularly let you know if you’re on track or make suggestions if you’re not — even if you aren’t scheduled to meet for a while. And, speaking of conferring with your financial advisor, you’ll want someone who will meet with you when it’s convenient for you, whether it’s in person or over the phone.
Avoid making big promises? You want a financial advisor with the expertise and experience necessary to help you decide what is right for you. And you’ll want someone committed to your success. But there’s a big difference between someone who promises to do the best possible job for you and someone who promises big results. Be wary of financial advisors who claim they can consistently achieve high returns for you – there are very few guarantees in the investment world.
Explain how he or she will be compensated? Financial advisors get paid in various ways, often in some combination of fees and commissions. Ask all potential financial advisors how they get compensated; any reputable professional will be up front about his or her charges.
By finding the answers to these key questions, you should be able to find a financial advisor who is well-suited to work with you. So take the time you need to gather enough information to feel confident in your choice.
After all, you’re enlisting the help of someone who can have a big impact on your financial future.
Bruce Shepherd is a financial advisor with Edward Jones. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.