Whether you’re starting a new career and want to make sure that you are spending and investing money in the right places, or retiring and want to make your money lasts, an independent financial advisor can help you set goals and work with you to manage your money. Unfortunately, not every financial advisor will be right for you, so it is important to research before committing to someone. Before you sit down for a meeting, research the financial advisor and prepare a list of questions. This can help you determine whether your finances are in trustworthy hands.
What Is An Independent Financial Advisor?
Independent financial advisors are a class of professionals not tied to larger financial institutions. Typically, this allows them more freedom to offer solutions that help you rather than the institution they serve. Independent advisors may work alone or be part of an advisory firm.
Although speaking with an advisor about your money is a great way to improve your finances, you still want to ensure that the advisor you select is trustworthy and will help you more than they will help themselves. So before you discuss financial plans, you must verify that the advisor will protect your interests. Below is a list of questions you should bring up with your financial counselor before agreeing to hire them.
Questions to Ask Your Independent Financial Advisor
Are they a fiduciary? You want your advisor to answer yes to this question. If they are a fiduciary, this is proof that they must act in your best interests. Advisors who work for the Registered Investment Advisory (RIA) must act as fiduciaries. Some advisors who work for banks or other agencies might act in the best interests of their corporation.
What are their qualifications and experience? Your financial planner may have certifications or credentials in managing money. They might be a certified financial planner (CFP) or a chartered financial analyst (CFA). Many of these qualifications require work experience as well as time in the classroom. As great as many certifications are, there is no replacement for hands-on experience working with clients.
How often and with what method will they communicate? Do you want an advisor who frequently talks with you, preferably face-to-face, virtually, by phone?
How do they receive income? When advisors work for banks or investment firms, they often have quotas and sales goals for their employment contracts.
They may also receive a commission for selling particular products. A reputable independent advisor will be paid by providing advice, and this advice can be paid for based on assets managed or flat financial planning fees. They are not able to take a commission so that they do not have to recommend specific products in order to make money.
What is their investment philosophy? This question is an excellent way to discover whether your advisor’s goals match your own. If their investment philosophy is radically different from yours, they may not be the right fit for you and your finances. Consider how risk-averse you are and seek out a financial advisor that can be objective in providing sound advice.
What types of clients do they typically serve? If you do not match their client profile, they may not be the best advisor to offer you the investment advice you need. You may also want to ask how many clients they typically serve each year. A large client profile may mean less personalized advice or advise in a different field than the one in which you operate.
What taxes and fees can you expect? This question encourages your advisor to be upfront about the price you pay. You want to avoid anything that could increase your costs without your knowledge. It is common to pay fund expenses to the investment companies of the securities that you hold.
There are still some mutual funds that charge small trade fees, and many ETFs charge no fees to trade. Many of these, when all added up, can add to the expense of investing. A good advisor will minimize fees where possible.
Trust the Experts At Inflection Advisors
The benefits of hiring a professional to manage your finances are many. The added free time and financial stability can decrease your stress. However, hiring a financial advisor can be a big decision—which is why it is vital that you ask questions to ensure that your financial advisor will be a good fit for you.
When choosing someone to guide you through financial decisions, a little extra effort can make the relationship last longer and be more beneficial for you. The experts at Inflection Advisors would be happy to discuss how we operate and how we can help you achieve your financial goals. Reach out to learn more or to schedule an appointment.