5 Questions To Ask Financial Advisor
When choosing someone to manage your money, it is import to understand these 5 questions to ask financial advisor professionals. A financial advisor spends his career managing money and planning for the future. As such, a qualified financial advisor is an essential part of any man’s financial puzzle.
- How are you compensated? An excellent financial advisor will clearly explain how they are compensated. Understanding if they are paid a commission on the products they sell and the types of fees they generate from their clients should play a role as you form your opinion of their suggestions. If a financial advisor’s compensation structure is not clear and transparent, move on to another advisor.
- How is your track record? There are many ways to look at a financial advisor’s track record. Comparisons to the stock market rate of return (both short term and long term) allow you to get a general sense of a financial advisor’s performance. Asking how many of their clients beat their benchmarks and goals gives you an indication of how your portfolio will perform in his hands compared to what you are told to expect. Also ask if the financial advisor computes absolute returns or returns relative to a benchmark (such as the stock market)–the best compute returns relative to a benchmark to make it clear if they are beating or falling behind the market as a whole.
- How long have you been a financial advisor? As with anything, practice makes perfect. A financial advisor should have significant experience before you put him in charge of your money. More experience leads to a better understanding of financial products, opportunities, and planning options.
- What are your qualifications? The best financial advisors hold a CFA (chartered financial analyst) qualification. This qualification requires three exams, spaced one year apart, and several years of financial experience. A financial advisor holding a CFA is certain to be qualified and understands that his fiduciary duty lies with his clients.
- Do you have references I can contact? As with all professional services, references are key. Ask for a list of references and follow up with them. Make sure these clients are happy with the financial advisor’s performance and inquire about his accessibility. If many others are happy with him, it is more likely you will be as well.
Choosing a financial advisor is an important aspect of your financial health. Use this list of 5 questions to ask financial advisor professionals to scope out potential advisors that fit into your life.