When entering the world of stock trading, it is important you have a trustworthy financial advisor on your side. Typically, a good financial advisor is one who has earned a positive reputation in your area, and who ensures you are getting the best service at the lowest price. Finding one may seem like a breeze, however it is not something to be done on a whim as the financial advising field does not require as many qualifications as you might think. Below, take the time to read the tips that detail how to find an advisor that will work for you.
Know their Background
One of the key steps in appointing the right financial advisor for you is knowing how long they have been in business, their reputation, and their power in the field. As you do not need a college diploma to become a financial advisor, checking the three factors below is a good start:
As we stated above, one does not have to have a tertiary education to sell you stocks, or give you financial advice. The person in question could even be a high-school dropout. Although most successful financial advisors have had some sort of formal training, all one has to do is pass the exams Series 6, Series 7, and Series 63. Don’t be afraid to ask your financial advisor about his or her education, especially if that is a detail that is important to you.
Aside from book smarts, a reputable financial advisor is also one who has ample knowledge in the real world of banking, stocks, and money management. You could begin by asking people who have used the services of the individual you are considering, and see how his or her decisions have played out for others. The more resources you find, the better.
As part of their contract, financial advisors are required to provide to you a copy of their financial history. If the services you are seeking show recent reports of bankruptcy, you should take it as a sign to go elsewhere.
Are they Held to Fiduciary Standards?
When a financial advisor is held to fiduciary standards, he or she is contracted to work in the best interest of the investor. He or she also has someone working behind the scenes, ensuring that the best decision is always made.
Unfortunately, the majority of financial advisors choose not to be set to these standards, because they are optional. This flaw in the system lends itself to the rapid buying and selling of stocks, with the only goal of generating more commissions. To ensure your financial advisor is working in your favor, do not hesitate to ask them if they have chosen to take on this responsibility.
Know Your Firm
- Payment Options
If you think you’ve found the right financial advisor, you should then begin talking about how he or she plans to be paid. While the traditional method is to be paid on commission, there are some more modern firms opting for fee payment, instead. Fees less than 2% are standard, so you should be wary about rates that are very high or very low. If you are paying commission, almost the same idea applies: look for something in the middle, and ask about the circumstances of any prices that do not hover around average.
- Services Available
Most firms do more than just advise you as to which stocks should next be purchased, in order to give you a better-rounded look at your monetary status. Some of these procedures include:
- Tracking the cost of your investments.
- Filing tax returns, and responding to your tax-related questions.
- Looking for risks in any of your investments, and aiding you in their management.
- Planning your estate.
- Referring you to other firms, should it not be able to meet your requests.
Some firms offer these additional services at no cost, while others will charge you for the extra work. Although not every firm provides all of these, that does not mean you should discard them from your options. Even the simplest operations could hold the advisor who does his or her best to live up to your needs and his or her reputation.
In all, good financial advisors act more as “life coaches” who are able to direct your purchases over hurdles like home mortgages, divorce, and a college education. They do their best to charge you the lowest possible rate for their services, and ensure you are meeting goals both in your bank account and in your life. They are also available for frequent meetings, and lend an open ear to discuss your objectives, your financial documents, and your legal documents. They provide a sense of security in their service, and are open with the information they reveal. For most, the ideal financial advisor is one who emanates a feeling of trust.