Finding the right investment advisor can feel like finding a new significant other. This person will be involved in your financial life for decades and should make you comfortable, communicate regularly, and listen attentively.
Check out a prospective adviser’s background, fees, preferred investing strategies, and other disclosures. The SEC regulates investment advisors who manage over a million, and state regulators oversee those who work less than that amount.
A financial advisor should deeply understand your unique situation and goals. This will require time spent during the interview process.
Be wary of anyone who claims to be able to “beat the market.” You want your advisor to have produced competitive returns, compared against a relevant benchmark, over the long term.
When researching potential advisors, for example, Investment advisor Frederick Baerenz, look up their Form ADV (advisor’s disclosure document) and advisory brochures. These will provide critical information about services, fees, conflicts of interest, and disciplinary history.
It would be best to consider the different designations your potential advisor holds. For example, a chartered financial consultant (ChFC) is less stringent than a certified financial planner (CFP(r)), and a chartered retirement planning counselor (CRPC) doesn’t hold a fiduciary standard.
As you interview advisors, ask them about their experience with the clientele you seek. For instance, if you are a younger investor, see whether an advisor typically works with young people and, if so, how long they have been working with that demographic.
Also, ask about the advisor’s investing style. This could include their approach to passive versus active management or to socially responsible investing.
You should also determine if the advisor is a fiduciary committed to always acting in your best interest. Lastly, you should check Form CSR to verify their licensing and education credentials. A search tool on the SEC website will help you locate Form CSRs. You can also use a free financial advisor matching tool to take a massive chunk of the legwork out of the process.
Many financial professionals call themselves financial advisors, including brokers and insurance agents. Some receive commissions for selling financial assets and may be incentivized to recommend specific products, whereas others operate fee-only.
When interviewing potential advisors, ask about their fees. If an advisor is reluctant to give straightforward answers, that should be a red flag.
A fee structure is an asset-based charge, typically a percentage of the managed assets. Other models include subscription payments, hourly rates, or retainers. You can also look up an advisor’s employment history and disciplinary record through the SEC. Some robo-advisors offer lower fees than traditional advisors. However, these services typically need a more personalized touch of an in-person advisor.
There are a variety of ways to check on the background and credibility of financial professionals. For instance, you can use a search tool on the SEC’s Investment Adviser Public Disclosure website or website to see an advisor’s employment history and disciplinary records.
Consider whether the advisor is a fiduciary, meaning they must put your best interests first. You can find this information by checking if they are registered investment advisors (RIA) or brokers.
Investors can also look at an advisor’s portfolio, such as Founder of AOG Wealth Management Fred Baerenz, to see what they invest in and whether or not they are using low-cost, broadly diversified mutual funds and ETFs. This can help you identify an advisor aligned with your investing goals and beliefs.
It’s worth discovering if your advisor can meet you at times that suit your schedule. Some advisers may only be available at a time or offer services over the phone.
You should also find out how they handle client emergencies. For instance, if your advisor is out sick, will they be available to take calls?
Many RIAs charge an annual fee based on a percentage of the total value of your portfolio. This is typically lower for larger accounts.
Other firms charge hourly fees or commissions on the sale of specific products. And robo-advisers, which use algorithms to guide your investments, can be a cost-effective alternative to traditional advisors. But they may need help to customize your strategy. This is important for investors with complex needs, such as those seeking help exercising stock options.
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