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8 Factors to Consider When Picking Financial Advisors

8 Factors to Consider When Picking Financial Advisors

Many people don’t understand the benefits of using a financial advisor. You might even be thinking, why do I need a financial advisor? Isn’t an accountant good enough?

Accountants may be able to handle the heavy work by collecting financial reports and handling bookkeeping. But financial advisers can assist you in analyzing those results and provide meaningful suggestions based on them.

Picking financial advisors to fit your requirements can be a little daunting if you’ve never had one before.

Ultimately, you’ll be hiring someone specializing in making your money work for you using expert methods and knowledge. But they will have access to a large proportion of your financial information. Therefore, selecting a financial advisor that you can trust and understands your needs is crucial.

So now, let’s look through eight factors to consider when choosing financial advisors.

1. What Services Do You Need?

If you’re a first-time investor interested in using a financial advisor, it’s a good idea to have some idea of what services you need.

You may need a financial advisor for a variety of reasons, including:

  • Investment portfolios
  • Tax advice
  • Business startup advice
  • profit and loss analysis
  • Insurance
  • Debt repayment
  • Mergers & acquisitions

These are just some of the things a financial advisor can help you with.

Knowing which areas you require assistance in can help you narrow down your list of advisors. Not all of them will be able to give the services you require. Therefore, learning a little about the industry is a wise first step before contacting any advisors.

Here’s some more advice for first-time investors.

2. Are They Qualified Enough?

It’s critical to work with financial advisors that have all of the necessary credentials. This will need a little more investigation on your part, but it will be worthwhile.

In Australia, financial advisors should have:

  • A relevant Bachelor degree or higher
  • A year of professional, supervised experience
  • Pass a Financial Adviser Standards and Ethics Authority (FASEA) exam

You can find more detailed information about such required credentials on the FASEA website.

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When you are researching financial advisors, their credentials should be easy to find. However, if it’s hard to find credentials online, you might want to avoid them.

3. Financial Advising Experience

It’s great for financial advisors to have good credentials, but they could be a risk to your finances if they haven’t any decent financial advising experience.

Also, before becoming a financial advisor, many people work in a variety of industries. And an advisor’s unique work experience could fit with your investing needs.

Of course, everyone has to start somewhere in their career. Naturally, therefore, some financial advisors aren’t as experienced as others. But having less experience won’t always detract from their ability to perform a good job.

One of the best ways to get a good feeling about a financial advisor is to take advantage of free consultations. Then, when you’re face to face with them, you can ask them all the questions you want and gauge their character.

4. Do You Need a Specialist?

Although there are countless options for advisors, not all of them will specialize in your required services. So after you’ve narrowed down your requirements, look over each of their websites to see what services they offer.

If you’re a retailer, for example, and your financial advisor has only worked with manufacturers, they might not be suitable. Industry knowledge is an essential factor to consider when selecting financial advisors, as it can help you make better decisions in your particular field.

If you are looking to hire an adviser to handle your personal wealth, then having a specialist might not be so important. In this case, it’s a better look at their experience, character, and whether you can communicate well.

5. How Do They Report?

What is their standard procedure for preparing financial reports?

As a client, you want financial statements valuable to you and produced at the rate you need. So, for example, if they’ve only done annual reports, but you need weekly reports, their process might not be appropriate for the level of data you need.

It’s even better if they’re willing to be flexible on this. Just make sure that everything is clear before you start working together. It’s better to get things out of the way now so that disagreements don’t linger.

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6. Fee Transparency

Inquire about how they will charge you. Financial advisors charge differently, so it’s always a good idea to clarify this, so you don’t end up spending more than you anticipated. A reputable and experienced financial advisor will be open about their fee expectations upfront.

Some work by fee-only methods. These may include an hourly price, a percentage of managing assets, or a flat fee. Yet, others will use Commission-based systems as well.

There is some debate about fee-only versus commission-based methods, so it’s worth reading a little research on the subject.

7. Life Transitions

Naturally, you will go through changes in your life. For example, you might get married and start a family, or you might need support to go through a divorce or the death of a loved one. Retirement can be a tricky period to deal with too financially.

These types of changes, whether expected or not, can be disruptive and sometimes upsetting. Therefore, ensure you choose a financial advisor who you feel you can trust and has to experience with life transitions.

8. Clear-Talking and Responsible

Inquire about their investment method in layman’s terms. Expect a lot of details but not a lot of jargon.

What products and investment vehicles does the financial advisor advocate for, and which do they avoid, if any? Will investment adjustments be made only with your permission, or will the advisor be able to make changes to your portfolio at his or her discretion?

Furthermore, what is the frequency with which you will meet with your advisor? How will you give information about your portfolio? Who is the primary point of contact for you?

These are the sorts of questions you should be asking any potential financial advisor before committing to their services.

Picking Financial Advisors the Right Way

If you take the eight factors we’ve discussed seriously, then it shouldn’t be too difficult to find a financial advisor that fits your needs.

Picking Financial Advisors can be compared to many other services you invest in. For example, if you need a new phone contract, you’re to shop around and look for one that works best for you.

So thanks for stopping, and good luck with your future investments. For more informative reads, please take a moment to check out some of our other blog posts.


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