As a business owner, you know the value of watching your money and managing it well. However, the world of personal finance is getting more and more intricate. These days you have what feels like endless investment options. At the same time, the unpredictability associated with investments has also increased, especially after the recent financial meltdown. As a result, a lot of business owners are flocking to financial advisors (FA) in order to navigate the turbulent sea of the financial market.
However, hiring the right financial advisor can be a tricky business. Statistics from the Bureau of Labor reveal that there are close to 200,000 financial advisors in the U.S. The bureau has also predicted that this number can climb up to a quarter million by 2016. Quite clearly, there are too many FAs around and many of them are simply not worth hiring. If you end up choosing an insurance agent as a FA, then chances are that you will lose more money than your annual compensation. Under the circumstance, you must check the following things before hiring a FA:
1) Is your FA qualified enough?
A Reputable FA should be either a Certified Financial Planner or a Certified Public Accountants or a Chartered Financial Analyst. Ask the FA about his qualification and verify it online.
2) A FA can either charge you fees or ask for a salary.
If you are given a choice, then opt for fee-only option. You should be aware of the fact that some financial advisors get commission based on selling specific investments. Also, quite a few FAs would ask for a percentage of the profits you make through your investments. There should be complete transparency about these issues.
3) Evaluate the past records of the FA.
Ask him for the names of some of his clients and check whether the clients are satisfied with his work. However, you can't ask for sensitive information about his other clients for obvious reasons.
4) Consider the number of clients the FA has.
If he has over 100 clients, then you can safely assume are you are not going to get much attention from him. Also, FAs with a high number of clients often tend to sell commission-based investments to you.
5) How long has been your FA in business?
He might look, old but he might not have enough relevant experience. To play it safe, always hire FAs who have considerable financial experience.
6) Is your FA registered?
It is wise to choose FAs who are registered with the Financial Industry Regulatory Authority or Securities and Exchange Commission or similar licensing bodies. This helps you to avert scams.
7) Is your FA a member of any professional body like the National Association of Personal Financial Advisors?
If yes, then it will be quite reassuring. However, some FAs are members of fake organizations. So if they name an organization which you have not heard of, check online to get the necessary information.
8) Ask the FA whether he has comprehensive knowledge on a wide range of investment options.
Some FAs specialize in specific investment products. This is an issue because it will prevent or weaken the diversification of your portfolio.
9) Has the FA been sued?
Check whether the FA has ever been sued by any of his clients or any professional body. Avoid FAs against whom formal complaints have been lodged in the past.
10) Are expectations of returns realistic?
You want to make profits. However, if the FA is promising you incredible returns, then you have reason to be suspicious. Also, stay away from FAs who want you to make your decisions too quickly.
You have worked very hard to earn your money. You do not want to part with it over someone else's mistake. Therefore, keep the above points in mind before hiring a financial advisor. Good luck.