How to Choose a Financial Advisor
A financial consultant or financial adviser is an individual who offers financial advisory services to clients according to their financial circumstances. In most countries, financial advisers are required to complete certain educational training and obtain registration with a regulatory agency in order to offer financial advice. In the United States, this regulatory agency is the Financial Industry Regulatory Authority (FIRCA). There are also other similar regulatory bodies throughout the world. Some of the regulatory bodies in the United States include the SEC, Commodity Futures Trading Commission, and the Commodity Futures Trading Order (CFOT) Committee on Securities Derivatives.
An important role of financial advisors is to help clients set up and maintain long-term investment plans. They advise their clients on how to hedge their interests to minimize risks and increase returns. While financial advisors can be involved in all aspects of a client’s investments, some specialize in one particular area such as international investments, real estate, hedge funds, and more. Depending on the needs of their clients, financial professionals can also serve as brokers or even stockbrokers, providing an extra pair of eyes on the portfolio.
When choosing a financial advisor, it is important to do your research to make sure you are getting the right kind of advisor for your needs. The first step in doing your research is to speak with friends and family whom you trust for advice. Ask them what they think about the advisor you are considering. Also, ask them what their experience with that particular advisor was like and if they were satisfied with the advisor’s performance. If you know someone who works for a bank or other institution, take note of any recommendations they may have made regarding your chosen advisor.
Once you have several possible financial advisors in mind, compare their resumes and experiences to determine which ones are the best match for your needs. While price will likely be a factor for you when evaluating financial advisors, this should not be the only criteria for choosing an advisor. Instead, find an advisor who is experienced and knowledgeable in his or her field. A long-term financial planner who has been in the investment field for several years will undoubtedly be a great asset to your retirement planning team, while an advisor who has been working in the field for only a few months should not be considered unless he or she has experience that will benefit your retirement plans.
Other areas to evaluate before hiring a financial advisor include education, certification, and licenses. Encompassing a wide range of knowledge and expertise, financial advisors can be found with a wide range of educational backgrounds. For example, a registered investment counselor may educate himself or herself about many different investment strategies. A tax consultant may include investments and tax strategies as part of his or her education. Brokers can be licensed by the CFTC (Commerce and Service Commission) to provide investment advice to their clients, as can stockbrokers who are also registered investment counselors.
There is one other area that you need to consider before hiring a Certified Financial Planning Advisor, and it is whether or not the firm employs the “suitability standard”. The suitability standard is a standard that ensures that an advisor meets a minimum level of educational and experience in order to offer you professional advice. The majority of financial advisors work along this standard, and a certified financial planner who refuses to follow this standard could pose a great threat to your retirement wealth. Because of this, it is important that you ask any potential advisors for a guarantee regarding the compliance of their firm’s suitability standard.