When it comes to finances, it’s not just a few figures in your bank account. It is basically the key to helping you make some of the important life decisions, like buying a vacation home, enjoying a leisurely retirement, or starting your own business. But how to manage all your finances well? For that, you need the help of a good financial advisor to help you make wise decisions.
Wondering what qualities to look for in a good financial advisor? Here are some top abilities that a professional financial advisor must have:
Table of Contents
Holistic thinking
When it comes to financial advice, many people start thinking about bonds and stocks or a portfolio mix. But a good financial advisor has a holistic approach to help you guide your financial needs. A professional advisor helps you assess the right types of insurance policies or make the right strategy as per your goals – be it retirement or paying for your children’s college. Practically, a good advisor must trade for you and provide you with a whole range of investments, such as 401(k)s. Therefore, look for a holistic thinker when it comes to getting holistic advice.
Trustworthy
When it comes to allowing someone to handle your finances, you need to have trust in them. So, you need to look for an advisor who you feel a connection with. After all, you need to share some of the intimate family goals, worries, and financial decisions with them. Your chosen advisor needs to understand you on both emotional and financial levels. Hence, they can help you make the right financial strategies. Besides your intuition, you need to look for a certified professional with a legal obligation to put your interest first.
Proactive advice
If you are the only one sending emails and poking them for advice every now or then, your advisor may not be doing a great job. Your selected advisor needs to come forward himself/herself to share ideas to manage your finances well. Generally, a good financial advisor is likely to update clients on various topics, like making changes to your portfolio, shifting the investment outlook, and rebalancing tax-saving ideas and opportunities. We understand that you need to have some personal association with your advisor. But don’t forget that you’re paying them for a job and they need to work accordingly. Keeping that in mind, you need to invest in hiring an advisor with a proactive approach to your financial matters.
Transparency
How does your financial advisor make his/her money? While some of them say that they don’t charge any fees, it does not mean they are working free of cost for you. They are most likely to get compensation by taking huge commissions from the funds you purchase from them. On the other hand, others only charge a percentage of your investment asset value. This gets them more like a vested interest in your success. Nonetheless, there can be add-on fees or some other hidden charges. The various fee structures depend on distinct situations. However, what’s important is to seek total fee transparency from your financial advisor.
Responsiveness
A good financial advisor must also be quite responsive to sudden changes in your financial plans. A modern advisor must rapidly plugin and realize the impact of a new plan. For instance, if you spend some money on buying a second home or on your kids’ education, there will be an impact on your financial situation. And, your advisor must be checking in with you annually to access such changes for proper wealth management.
Form a human connection
If your financial advisor begins a relationship by only talking about your finances and investments, you need to be wary. In fact, a good financial advisor forms more of a human connection with you. They first engage you in a detailed discussion about your entire background, concerns, and goals. Talking about investment vehicles is vital, but this decision must come after you instill a strong trust in your advisor. Furthermore, they even need to be more aware of their financial decisions before discussions on financial matters.
Ability to say ‘no’
A good financial advisor is not someone who always agrees with all our plans and ideas to stroke your ego. This may make bad financial planning. Your advisor is there for a reason and that is to offer you honest advice as per his/her experience and knowledge. Further, this will help in ensuring long-term financial independence. At times, it may even mean disagreeing with your plans for better financial decisions. So, make sure that your advisor can say a firm ‘no’ when he/she thinks that a certain financial plan won’t work in your situation. Your advisor should involve thoughtful considerations and questions before updating a financial plan.
Conclusion
When it comes to financial planning, it’s not a one-size-fits-all concept. What may work for someone may completely go down the drain for others. This is where a professional financial advisor can help. You need to consider the given seven factors to choose the right advisor to help you make wise financial decisions.
