How to Select a Financial Advisor
Many financial planners agree that references and recommendations from your friends, neighbors, and relatives may not be enough. Certainly, recommendations can be useful from those who have had good experiences; however, because a good experience with a financial advisor is determined over a long period of time, it sometimes is not always easy to tell how well one adviser does as compared to another
Since referral is only a partial solution, you'll need to do your own research and evaluation. There are three primary questions to answer
- What is his level of expertise?
- Are his recommendations in your best interest?
- How do charges compare to the industry
Level of expertise can often be found by simply review the advisors years of experience and track record, and following up with people who he supplies as referrals. Look also for your advisor to have written informative articles and other materials that help demonstrate his competence on the subject.
The second two questions are closely tied; perhaps the best way to get at whether or not an advisor has your best interest at heart is to look at his fees and expenses. There are a large number and variety of no-load (no-fee) mutual funds available, so, for starters there should not be sales fee associated with these accounts. The bottom line is that you should expect your advisor will charge about 1% of assets.
There are other things you can do in advance of hiring a financial planner that will help you get a leg up. For example, there are many books on the subject of financial planning. You don’t have to make yourself an expert, but a little knowledge will help you protect your interests.
You can also consider developing your own financial plan first and then hiring the planner to evaluate that plan and make recommendations on it.