Hiring the right financial advisor can be an important step towards managing your wealth better. Before hiring a financial advisor, check his credentials, references and qualifications. Besides this, also ask him the following six questions to assess whether you can benefit from his services.
What is the cost of the services offered?
The fee charged by your advisor makes up just one part of your overall costs. You also have to take into account brokerage commissions if your financial advisor will be trading in securities. A thrifty financial advisor is often the best choice. He should ideally trade to ensure that your annual portfolio maintenance costs (excluding advisor fee) are as low as possible. Additionally, compare fees of different advisors so that you get the best deal.
Are your objectives the same as mine?
It is better to choose an advisor who does not work on a commission basis. An advisor working on commission basis is often tempted to suggest investments that will fetch him a large commission. On the other hand, if you decide to pay an advisor an annual fee, which is about 1% of the assets, the payment will depend entirely on the performance of your portfolio.
What according to you is good performance?
Before hiring a financial advisor, ask his previous clients about their portfolio performances. Most financial advisors make their performances appear better by pulling out measures that suit their case – be aware of that. Your stock portfolio performance should at least equal, if not better the S&P 500 index performance.
How well do you time the market?
Predicting the market situation and taking advantage of the situation is termed as timing the market. Experienced financial advisors time the market well. Make sure to ask your financial advisor about the strategies he uses to invest in the market and how strategies change with the changing market scenario. By knowing this, you can gauge how well the advisor can time the market.
How well do you know me?
The choice of investment and risk appetite varies from person to person. Good financial advisors will ask what your priorities are, whether you love taking risks, the type of investments you prefer and your security needs. A good, reliable advisor will discuss your investment preferences and concerns in depth.
Do you offer a holistic approach?
A good financial advisor is well versed not only in managing money but also in other areas such as insurance, estate planning and more. Choose an advisor who is an all-round financial expert and offers a holistic approach.
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