Not everyone wants to handle their finance and investments themselves and most people like to take advice on investments before they make a decision about where to put their hard earned money. Even if you feel that you know the world of finance quite well and are quite good at picking sound investments there will be times where it is prudent to take the advice of someone who deals with finance and investments all day every day. But how do you find someone who is both highly-skilled and trustworthy? How can you know that any financial advisor you hire will be looking out for your interests and not their own? And how will you know if they are any good or not? Here are a couple of important things to bear in mind before choosing your financial advisor:
(1) Work Out What You Want – Before you start talking to financial advisors it is important to sit down and decide what type of investments you will be looking for. Are you looking for slow and safe investments which will tie your money up for years but which come with no risk? Or do you want to dabble in shorter, riskier investments or something in between? How much will you be investing? And why do you need a financial advisor?
(2) Talk to Friends, Family and Colleagues – Spend some time talking to everyone you know and find out if any of them have used a financial advisor in the past. Ask them what they were like and if they would recommend then. Similarly, if you have an accountant who you trust and respect, see if they can recommend someone. Once you have a few recommendations, put them in a shortlist of people to call.
(3) Check They Will Be Independent – Don’t go for a financial advisor who is affiliated to a bank or other financial institution as they will always try to push their company’s products. Go for an independent advisor. They will almost certainly have favourite products too and deals they want to push but they wont be pressured or expected to sell a particular product.
(4) Go and Meet Them – Essentially you are conducting a job interview to see which one of these advisors you want to hire. Before you meet them all, draw up a list of the qualifications and certifications you expect them to have and find out whether they specialise in the kind of investment you are looking for. Do some research in investment forums about the best products on the market and prepare a list of questions related to these products. Once in the interview, see if they make sense, if they know of the products you have read about on the forums and if they can point to the pros and cons of various products. Also, see if you feel comfortable dealing with this person. Ask for a couple of references from other clients.
(5) Costs – Find out what the going rate for a financial advisor is or how much they will be making on the products they recommend to you. Will they be charging a flat fee or taking a commission? If it is a flat fee is it charged by the hour or at a set price? Again, do your research on investment forums and check that their rates are fair and comparable to others in their industry.
(6) Go Home and Think About It – There is no rush, and even if there is you should never, ever sign up to anything in the office there and then. Ask for some time to think about what they have told you and then go home and weigh up everything you have heard from the different advisors. If something doesn’t feel right, chances are it isn’t right. Check the references they have given you.
Alison is a finance journalist and business blogger. She writes about all areas of personal finance from credit and store cards to taxes to small business capital.