How to Select a Good Financial Consultant? 

  minutes read

Finding a financial consultant is hardly a difficult feat. The world is filled with financial consultants. The challenge is to choose one who is good at their job. And this can get as difficult as you may imagine.

Of course, it isn’t impossible to learn how to choose a good financial consultant for your needs. If you feel you’re not good with money and could use a little help managing your finances, hiring a financial consultant can be a great decision.

In the long run, it can help you achieve financial freedom and time freedom, and will allow you to deal with the lack of quality time with family. Make use of the following tips if you’re trying to find the best financial consultant for your needs.

1. Analyze What You Need Help with In Your Financial Life

Before you start looking for financial consultants, you must know what you’re looking for. When you have your first appointment with a potential financial consultant, you want to be ready to discuss your money management needs with them instead of being lost about where to even start.

A good financial consultant doesn’t just provide investment advice. Ideally, they should be able to help you create a complete plan or chart to cover all your financial needs, including investment advice, payment of debts, estate planning, insurance product suggestions, as well as retirement. However, this will only be possible if you know what you are expecting from your financial consultant. Or else, they would only be able to provide you with a generic plan and not one specifically designed for your needs.

If you are still in the early stages of your career or don’t have a family to support, you will likely not need comprehensive financial planning – at least not at the moment. However, if you have some complex financial needs you need to cover, you will have to work closely with your financial consultant to make a plan that suits you. So be prepared about what you will be discussing during the first appointment.

2. Types of Financial Consultants

The reason there are so many financial consultants out there is that there is no federal law regulating who can call themselves financial consultants and provide financial advice. This is why it is important to stay extra careful while looking for one, as most don’t have your best interest at heart and only want to make some money for themselves. Additionally, you want to be sure you choose one with actual skill and experience.

By learning about the different types of financial consultants, you can educate yourself about which ones are worth your time and which ones you need to avoid. Following are the different types of financial consultants.

  • Commission-Based Financial Consultants: These are likely the most common type of financial consultants you will come across. They make a good chunk of their money by the commission they earn by selling you third-party products. They will try to sell you certain products even if you don’t necessarily need them. That’s not to say that all commission-based Financial Consultants are scams. You may find some who are only trying to sell you things you need and will work to create a good financial plan. However, if you’re working with this type of financial consultant, it is important to remain extra careful.
  • Fee-Only Financial Consultants: These types of financial consultants only earn money from the fees you pay for their service. Depending on the type of agreement, the charges may be made on a percentage of the assets they manage for you, an hourly rate, or a flat rate. Either way, most fee-only financial consultants are fiduciaries. Since their income is completely dependent on their client, and by extension, the amount of money your make, they will most likely work the hardest to create a strong financial plan for you.
  • Robo-Advisors: Nowadays, you can even find automated financial consultants who offer low-cost advice based on pre-constructed diversified portfolios of exchange-traded funds (ETFs). While these may not be ideal for long-term financial planning, it can be helpful to opt for robo-advisors if you’re looking for advice for mid-term investment and don’t have the means to spend too much on financial consultants.

3. Make a Budget for Your Financial Consultant

There are a variety of fee structures that are offered by financial consultants nowadays. From flat rates to percent-based payments, you can choose to pay the rate and method that suits you the most.

However, it is important to create a budget in advance before you start looking for financial consultants about how much you’d be willing to and can realistically pay them. This will help you shortlist the financial consultants who come within your financial bracket.

4. Question to

After you’ve determined all of the above factors for yourself, you can finally start looking for a financial consultant for yourself. You may have to meet more than one financial consultant before deciding which one seems the best.

Here are some questions you can ask during the first meeting to determine who you want to choose.

  • What approach do you take during financial planning?
  • What services do you offer?
  • Are you a fiduciary?
  • Do you always work as a fiduciary?
  • What types of clients do you usually work for?
  • What will be the frequency of our appointments?
  • What financial planning service do you offer?
  • What information do you need about me to create the best financial plan for me?
  • How do you earn your money?

Only after thoroughly discussing all of these questions and getting satisfactory responses should you consider hiring a financial consultant.

Bottom Line

While hiring a financial consultant, do your research in advance and make sure that you don’t make any impulse decisions. Remember, a good financial consultant can make your whole life better and help you find happiness and financial freedom. So make your decision wisely.

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