When you are considering hiring a financial advisor, there are a few questions that you should ask to make sure that the advisor is both right for you and qualified to advise you on your finances. These questions will help you to make a knowledgeable and informed decision.
- First, is the advisor experienced? When meeting with the advisor for the first time, you will want to ask how long they have been in business, the types of clients they typically handle, and the breadth of experience they possess. Although your issues may not seem overly complicated, you may not be fully aware of all the strategies available to employ. Challenges facing seniors can be especially tricky; make sure you are not the advisor’s guinea pig. Many novices present public seminars with only a fundamental knowledge of tax and estate planning issues.
- Second, is there a commitment to continuing education? Complex financial laws are ever-changing, and the Indian economy never holds still. How many hours are spent each year keeping skills sharp? Are the continuing education hours at a beginning, intermediate, or advanced level?
- Third, what kind of planning do you need? Will you need a comprehensive retirement plan, tax planning, and estate planning? Or do you just need help in one particular area? Find out if they are a glorified insurance salesman or a bonafide financial planner.
- Fourth, is your advisor a solo-practitioner? Or is your advisor part of a team that he can turn to for strategizing on complex issues? Or to bring an additional perspective? Is his firm large enough to provide extensive resources as a large firm of pros?
- Fifth, what is their clientele like? You want to find a financial planner that handles similar clients to yourself. If you make anywhere between 20-25 lacs per annum, but your advisor primarily handles people with an annual income of 2 crores and up, are you going to receive the attention that you deserve? Are there other advisors with the firm that may be better suited to your situation? Does the advisor have a particular age demographic or preferred client type?
- Sixth, how is the consultant compensated? The three most common planning types include fee-only, fee-based, and commission only.
- Finally, is your advisor a professional? Be wary of persons who are merely part-timers working out of the trunk of their car, lack any relevant experience, omit commitment to continuing vocational education, and criticize others who do commit to high standards. They will often downplay the need for training, or boast they “know more about estate planning than most attorneys out there.” Smooth salespeople are often very charming and may even present a charismatic public seminar-but they may also be dangerous because they don’t know what they don’t know.
So, there you have it. Seven questions that you must ask every financial advisor before you consider working with them. Can you think of other essential questions to ask a financial advisor before hiring them? Let us know in the comments below.