The Rant
Finding a Financial Advisor
Submitted by fergus » Sat 13-Nov-2021, 17:13Subject Area: GeneralKeywords: Finance | 1 member rating |
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Hopefully you're not the investor who decided you've had enough and sold at or near the market lows this year. Do you have a long term investment horizon of 15 years or more but have cash stashed in "safe" CDs and money markets? Can you afford to invest in a Cd or bond paying 1-3%? Inflation and taxes will eat up a majority of your returns. You need to find a good financial planner to walk you through today's complicated investment world.
What is the role of the money you'd like to invest?
Before you find a financial planner, know what you want your money to accomplish. Is this short term money that you cannot afford to lose or is it long term money you can use to invest? Knowing what you want your money to accomplish is the first step to successful retirement planning.
Interviewing your financial planner and client centered financial planning westport connecticut
The best way to find a financial planner is to ask one of your successful friends, colleagues or co-workers for a referral. Once you have gathered a list of a few financial planners, it is time to set up a meeting. Any good financial planner will hold an introductory meeting at no cost. Remember this is your time to interview the candidate who will hold the key to your long term financial success. You should consider this a job interview. You are looking for the candidate who will make your money work the hardest and provide you with the best long term return.
Find Out How They Are Paid
Financial planners can be compensated in a number of ways. You will want to be sure they are advising you with your best interests in mind, not theirs. Financial planners are sales people which are why they have to be licensed
Accountable to an oversight organization and client centered financial planning westport connecticut
- Straight Commission-This has traditionally been the most common way financial professionals are compensated. When you purchase an investment, a percentage of your total purchase will be deducted from your investable assets and a portion of that will go directly to your advisor.
- Flat Fee-Another common method of compensation is through a flat fee. Some will charge an hourly rate or may charge a flat overall fee for putting together a financial plan for you. Typically, there is little concern for a conflict of interest since they are getting paid whether you purchase any investments or not.
- Fee based on total assets-Some financial planners charge an annual fee that is based on a percentage of the assets you have invested with them.
It is your responsibility to find out how your financial provider is compensated and to determine if their compensation fits what you are trying to accomplish. Personally, I prefer paying my advisor a fee based on total assets. This way your advisor is your investment partner. The more successful you are, the higher your advisor's compensation will be.
During the interview
You want to spend at least an hour or perhaps two interviewing your advisor. A good advisor will ask you to do some homework before you sit down and speak with them.
Cash-flow breakdown
Where exactly is your money going? You'll have to have a semblance of a running budget in order to develop reasonable savings goals.
Net-worth statement:
This is a list of everything you own; your assets minus your liabilities. This is obviously essential for determining your investment and estate-planning needs. For example, you may not have enough in your emergency fund. In this case, a good provider will instruct you to save more before investing one dollar with them.
Asset-allocation breakdown: A map of where your money is now invested and how it should be invested. The portfolio should include retirement and non-retirement accounts and should be diversified among many asset classes - US,foreign,small, large and medium cap, emerging market stocks, bonds, cash, and real estate.
Retirement Strategy: A plan for reaching your retirement goals, including an estimate of how much money you will need to retire comfortably. You need to know when you've reached your goals.
Education Strategy: A plan for helping to pay for your children's education if applicable. This might include separate accounts for state college-savings plan accounts.
Tax Analysis: Suggestions on reducing your taxes. For instance, converting to a Roth,IRA or taking measures to make sure you are being tax efficient. This could have a huge effect on your retirement.
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