How to Choose a Good Personal Financial Advisor
According to the Bureau of Labor Statistics, personal financial advisor give you advice on how to manage your finances. This includes advice on investments, taxes, retirement, mortgages, savings, estate planning and even insurance programs.
Do I need a Personal Financial Advisor?
The first question to be answered is whether you need a personal financial advisor. Here are a few reasons why hiring a personal financial advisor makes sense:
- Financial goals get more complicated as you age. Getting a financial advisor saves you a lot of time
- Financial advisors can help you stay disciplined with regard to your spending. A good financial advisor will invest for you or will nag you until you make the investments that are good for you.
- While you shouldn’t just hand over the reins to your finances to someone else, having an expert guide you – correctly – can really help you maximize your investments and returns on investments. This means a less stressful retirement for you.
How to choose a good Personal Financial Advisor
The challenge most people face is finding a good financial advisor who will keep your needs foremost and will work for your benefit rather that his or her own advantage.
Here are a few things you should keep in mind when selecting a personal financial advisor to help you manage your finances:
- Make sure you choose a fiduciary. It doesn’t matter whether finance professional you choose is a financial advisor, financial planner, financial analyst, financial consultant, wealth manager or any other title. What matters is whether he or she is a fiduciary. This way, you know that your “advisor” is working with your best interests in mind.
- Make sure you choose someone with low fees. In fact, you need to make sure the fees you pay your personal financial advisor are well below 1%. According to an article in Fortune, fees for domestic stock and bond index funds should not be more than 0.1% (less than 10 basis points). For international funds, 0.2% (about 20 basis points) in fees is considered reasonable. Anything more than that, and you are being cheated.
- Make sure that advisor you choose is a Certified Financial Planner, which means that person would have undergone intense training on personal finance and has had to have passed the Certified Financial Planner Board of Standards.
- Avoid hiring someone who works on commissions. Chances are, they will work for their own benefit rather than yours.
- Choose a financial advisor who is willing to spend time with you, explaining all processes, investments, answering endless questions and also teaching you financial behavior. Choose someone who is interested in growing with you.
If you don’t have people who can recommend good financial advisors, then you can also check National Association of Personal Financial Advisors (NAPFA). The financial advisors listed on this network, work only on fees, which means they don’t take commissions from anywhere. They are also fiduciaries. Another great place to check is Garrett Planning Network.