How to Choose a Financial Adviser

  • How to Choose a Financial Adviser

    Given how volatile the stock markets are, hiring a financial adviser to steer you in the right direction is a wise decision. But how can you tell a financial adviser from a financial “salesperson?” After all, this adviser is going to be making recommendations on how your money should be invested. Make a few poorly planned financial moves, and you could wind up in serious trouble. When trying to find a financial adviser, what questions should you ask? And how do you know if an adviser truly cares about your well-being, rather than the commissions and fees he will receive from the investments he sold to you? MainStreet tapped some top finance experts to find out the dos and don’ts of hiring a financial adviser. Here's what they had to say. Photo Credit: alancleaver_2000
  • Qualifications

    If you’re going to pay someone to tell you where to invest your hard-earned money, that person had better be an expert in all areas of finance. One way to gauge an adviser’s expertise is to find out what publications he or she reads, says Alex R. Foster of AF Capital Management, LLC. If you learn that your adviser reads GQ, Sports Illustrated and US Weekly instead of The Wall Street Journal, Financial Times and Business Week, for example, that’s a huge red flag not to ignore. Oh, and if Jersey Shore is on the office TV, instead of CNBC, let’s just say this raises some questions about the adviser’s credentials (not that there’s anything wrong with watching Snooki or The Situation). Photo Credit: dpstyles™
  • Responsibility

    When you first meet with your adviser, she’ll ask you a multitude of questions about your financial life. But before you go into detail, give her a test: Tell her you have $10,000 in credit card debt, then see how she responds. The most financially wise response would be for her to begin helping you pay down that debt, instead of encouraging you to invest money in the markets. But if the adviser doesn’t recognize that throwing money into stocks or mutual funds while you’re in debt is a terrible idea, then keep her as far away from your money as possible. Additionally, if your adviser is too aggressive or does not seem to understand your financial goals, regardless of how high a return on investment she claims you’ll receive by hiring her, walk out the door. Remember, this is your hard-earned money you're looking to manage. Photo Credit: lululemon athletica
    How Much Is Too Much Commission?
  • How Much Is Too Much Commission?

    Regardless of how the market performs, you could lose tons of money if you get ripped off from your adviser’s high commissions and/or fees. “Understand if the adviser is receiving income only from clients (fee-only), or is paid by sales commissions, or both (fee-based or fee, plus commission). "If the adviser is a straight product pusher who gets paid by selling you more financial products, turn on your heel and move on,” says Robert J. DiQuollo, president of Brinton Eaton, a wealth advisory firm. Some mutual funds are known as “no-load” mutual funds, which means you don’t have to pay a commission on the fund. But some advisers will refrain from recommending no-load funds because there is no money in it for them. Be sure your adviser considers no-load funds, as it’s all about making sure he has your best interests in mind. Be mindful of how many trades your adviser makes in a given time, too, as this is yet another source of income for your adviser. Finally, there should always be full disclosure of all the fees the adviser is charging. Photo Credit: Katrina.Tuliao
  • Experience

    An adviser with decades of experience who has seen and advised clients through the many ups and downs of the market is the type of financial adviser you want on your side. John P. Chladek, president of Chladek Wealth Management, LLC, suggests financial advisers have at least three to five years of experience, which enables them to “handle both the investment and financial planning sides of the client relationship because they’ve seen the situations play out time and time again.” Do your homework and also ask the adviser for a list of references, since it’s valuable to hear other clients' experiences. Photo Credit: andrew.wippler
  • Education

    There are plenty of successful financial advisers without Harvard MBAs, but having the proper degrees and certifications is a plus. It’s important to know how the adviser was trained, says Glen Merritt, a financial adviser at Raymond James Financial Services. “Education and background is important. If the extent of an adviser’s training is from their company, then it is largely sales training,” he says. Photo Credit: Patricia Drury
    Background Check
  • Background Check

    If your financial adviser has ever had any run-ins with the law, you want to know about it. You can pay for a background check online. If anything looks suspicious, move on and find another adviser. If you are considering hiring an adviser who is a Certified Financial Planner (not an easy certification to attain), you can check the CFP website to determine if the adviser has ever been disciplined or has had her certification suspended – all red flags. Remember, this is your money and the vetting process for finding a financial adviser needs to be thorough. Do your due dilligence and your money will thank you. Scott Gamm is the founder of the personal finance website, He has appeared on NBC’s TODAY, MSNBC, Fox Business Network, Fox News, ABC News and CBS.  Follow Scott on Facebook and Twitter. Photo Credit: Siri Hardeland
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