How to find an Honest Financial adviser
Finding an honest financial adviser is the most important part of preparing for retirement. It doesn’t matter if you make $10,000 or $1,000,000 per year you should use a financial adviser. You may think you are the best person to manage your money, but let’s face it, you are always busy, usually lazy and are the world’s worst procrastinator. Before finding a financial adviser you need to understand their function and how they are compensated for their hard earned work.
A financial adviser is a professional who is trained in the art of financial planning services. They are a skilled investor that understands all levels of risk and can explain those risks to their clients. Their main goal in their job is to help their clients achieve their personal finance goals for the future.
Financial advisers are usually paid through two different types of methods: commission based and fee based.Â Commission-based advisers receive a percentage of the sales amount on the financial products they recommend such as mutual funds, stocks, bonds and insurance. Fee-based advisers are paid a flat fee. Their fees can be billed by the hour or project, as a flat annual amount, or as an annual percentage of assets under management. Before choosing a type of adviser do some research as to which type will benefit you more.
So How do you find an honest financial adviser? Here are some quick tips to test the honesty of your potential financial adviser:
- Look at the fees and expenses associated with his financial suggestions. If he recommends any mutual funds with “load fees” then he may be thinking more about his own financial situation.
- Is he going to overcharge you in fees? If he is going to charge you more than 1% of your assets then he probably is overcharging you.
- Make sure you are comfortable talking to your adviser and that he is knowledgeable of all the products he is trying to sell you. I like how Dave Ramsey says it… If you can’t explain something you are investing your money into to a child then you shouldn’t be investing in that particular item. That’s a financial advisers job to teach you about investments.
- Make sure they can actually use financial calculators and explain how they work to you. Sometimes financial advisers are simply sales people dressed in disguise. They don’t really know what they are selling themselves.
- Don’t take the advice of friends and family. Just because they tell you a financial adviser is good doesn’t make them a great financial planner. Do the research yourself and ask the right questions. After all it’s your money not theirs
Keep these simpleÂ thoughts in mind when searching for an honest financial adviser. YourÂ future is very important, don’t trust it to just anyone!