Financial advice will help you make the best decisions in financial investment. However, this will depend on the type of financial advisor that you hire. There are many financial advisors in different financial institutions and finding the best can be very challenging. You will of course want to evaluate things such as costs, reputation, and qualifications. However, when choosing an advisor to help you with your financial issues, two things usually play a major role in finding the best. Here are the two major things that you should always consider when looking for a financial advisor.
Look For a 'Fee-Only' Advisor
There are different types of advisors, such as 'fee-based' and 'fee-only' advisors. 'Fee-based' financial advisors are those that can receive commissions as well as other fees. 'Fee-only' financial advisors don't accept commissions. 'Fee-only' financial advisors usually work on an "as-needed" basis where they can charge you a certain percentage on the value of the assets they manage for you, at an hourly rate or on an agreed fixed fee for the project you need them for.
The main advantage of working with 'fee-only' financial advisors is that they are usually held to fiduciary standards. This means that they are required by law to act in the best interests of their clients. This eliminates any conflict of interest. For instance, if you were dealing with a financial advisor that accepts commission or other fees and he or she came across a product that pays a higher referral fee or commission than another, the advisor may have to choose between what's best for you or what would make him/her the most money. Therefore, since 'fee-only' advisors don't have the incentive to push for a given product over another, they will only advise you on the best investment decision according to your financial situation. In addition, the elimination of the conflict of interest makes 'fee-only' advisors more objective in their advice to you.
Choose an Advisor Who Works With a Third-Party Custodian
Having a third-party custodian means that your financial advisor won't take individual custody of your funds. A financial advisor that works with a third-party custodian helps to create a barrier between your funds and him or her. A third-party custodian will act as a watchdog for your funds. He or she can report any fraudulent activities that they suspect from your financial advisor. This is important because financial advisors usually have the discretion to invest or trade with your money. You don't want your money to end up being embezzled.
While hiring financial advisors may be new to you, it's a choice that can save you much more money in future as long as you find a good advisor and you follow his or her financial advice.