Four Steps in Choosing a Financial Advisor

Financial planning has become something that most of us delay but such as vacation shopping or preparing our taxes, we know we need to do it but sometimes end up on the rear burner. When it comes and it's time to choose a financial advisor to help and guide you through financial terms, rules, investment, and complex strategies, it's hard to find out who is the right person for you.

You can hire the best financial advisor to help you in managing financial issues. One consideration you want to see is how the advisor is compensated. The two main ways to compensate for your advisor are to pay fees or pay commissions.

  • Compensation only costs

The financial advisor only costs to collect clients directly on the advice and/or management that is ongoing. There is no other financial compensation provided, directly or indirectly, by other institutions. The only cost financial advisor only sells one thing their advice. Some advisors impose annual fees while others impose an annual percentage, based on the value of the assets they manage for you. Many individuals like this option because they feel there are fewer conflicts of interest when an advisor makes suggestions to buy or sell something. 

  • Commission

This type of advisor is not paid unless the client buys (or sometimes selling) financial products. Many trained commission-based advisors and good intentions. But the inherent potential conflicts can be greater than cost-based advisers. After saying that some investors felt they got more attention and suggestions and with this type of advisor because he constantly saw their account. 

Many people ask friends and family for suggestions and references as "trust" is a big factor in choosing someone to help manage your money. At present most brokerage companies, banks, and credit unions all have very similar investment products and strategies to offer their clients so that the playing field is quite even when it comes to products and services available. With that in mind again it usually goes down to who is the most comfortable with you.