If you are in the market for a financial advisor, it is very important to spend some time to pick the right one. You need to select a competent, qualified professional with whom you feel comfortable. Here are the most important questions to ask your prospective advisor … and how you can check up on their answers:
1. What is your educational background and what experience do you have? Find out what areas of study your advisor has pursued; how long the advisor has been in practice; and the number and types of companies with which she has been associated. Ask the advisor to describe her work experience and how it relates to her current practice.
2. What are your qualifications and what do you do to stay current in the field? Ask the advisor what qualifies her to offer financial advice and find out whether she is recognized as a Certified Financial Planner™ or CFP®. If she says she is, you can verify whether she is currently certified, whether she has ever been disciplined by the Certified Financial Planner™ Board of Standards, and whether she has personally filed for bankruptcy protection, by visiting the CFP® Board’s website.
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3. What services do you offer? The services a financial advisor offers depend on a number of factors including credentials, licenses and areas of expertise. Financial advisors cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with their states or the Securities and Exchange Commission. You can check the SEC’s website to see if your advisor and his/her firm are licensed and whether they have any disciplinary complaints or actions against them.
To find out if someone is licensed to sell insurance, Google your state’s department of insurance, and look for a page for consumers. For instance, this is the page for Pennsylvania.
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4. How will I pay for your services and how much do you typically charge? As part of your agreement, the advisor should clearly tell you in writing how she will be paid for the services to be provided. The most common ways fees are charged: hourly rate, flat rate, percentage of your assets and/or net worth and commissions. While the amount you pay the advisor may depend on your particular needs, the advisor should be able to provide you with an estimate of possible costs based on the work to be performed.
5. Could anyone (besides me) benefit from your recommendations? Some business relationships or partnerships that an advisor has could affect her professional judgment while working with you, inhibiting her from acting in your best interest. Ask the advisor to provide you with a description of her conflicts of interest in writing. For example, financial advisors who sell insurance policies, securities or mutual funds may have a business relationship with the companies that provide these financial products. She may also have relationships or partnerships that should be disclosed to you, such as business she receives for referring you to an insurance agent, accountant or attorney for implementation of planning suggestions.
6. Can I have it in writing? Ask the advisor to provide you with a written agreement that details the services that will be provided. Actually read it, don’t just recycle it! Keep this document in your files for future reference.
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