Tips for Finding the Right Investment Advisor
So you’ve made up your mind about hiring an investment advisor and now you’d like to know which type is right for you. Now what remains is the challenging part – meeting an advisor who is not only knowledgeable but also sincere in advancing your best interests. Then again, you will find many types of financial advisors. How do you determine which one is the most suitable for you? You can start by considering the volume and kinds of services you need.
If you only want advice on investing and other simple financial matters, hire a brokerage firm, which typically earns purely by commissions. But remember that brokers only need to uphold what is referred to as a suitability standard of care, which means that they are only allowed to suggest or sell investment types that match the client’s current financial status and financial goals. This does not include being legally required to recommend the best or most cost-effective investment types. This all the more makes it important to spend time researching the background of potential advisors.
Certified Financial Planners (CFP)
Certified Financial Planners (CFP)are finance experts who have acquired minimum experience and passed a board exam conducted by the Certified Financial Planner Board of Standards. In addition, CFPs need to pass continuing education requirements to keep their CFP status. CFPs have professional knowledge in several areas of financial planning, from insurance to taxes to estate planning and more.
Registered Investment Advisor (RIA)
If you’re looking for investment advice and continuous financial planning, a Registered Investment Adviser may be right for you. These professionals are only paid by the client – you – and they only recommend investments (for instance, no-load mutual funds, ETFs, etc.) that best meet your needs.
They are also required to follow a fiduciary standard of care, which is more complex than the suitability standard of a broker. Thus, an RIA is legally required to prioritize the client’s interest above their own. You will pay continuing fees to the RIA, but if you choose a good one, you can reduce your expenses with low-cost mutual funds, which are known to be the best-performing funds.
Insurance Agents and Bankers
Even as insurance agents and bankers are not financial planners nor investment advisors, they are legally permitted to sell investment products like mutual funds, stocks, bonds, etc. As well, they may function as financial planning consultants.
Finally, whomever you decide to hire as an advisor or planner, it is best to pick one with certification. You should also ask for referrals from friends, colleagues or anyone you trust, or at least scan some client reviews online before hiring someone.