Regardless of whether you're buying your first place, opening a business or starting a family, it's important to know that your financial tips are coming from someone you know you can trust. Here are some tips and suggestions for troubleshooting a financial advice relationship before it becomes something serious.
Doling out responsibility
Trust is only one indicative aspect of a fair relationship. Handling assignment of tasks should be carried out before you even go out and search for an advisor. In other words, don't go searching for someone you can lay all your troubles on and expect not to put in any effort yourself.
A diversified group of advisors is best for those who can afford it. Finance is complex – maybe not as much so as medicine, but with worldwide markets like NASDAQ and the Nikei, risk management and calculations plus a host of ever-changing investment options it's a lot to expect that one person can handle all of it alone.
Furthermore, if you find an advisor who wants to take over all your finances and won't trust you with any part of the process, that sort of strong-arming should be a red flag that you don't want to do business with that individual. Always keep tabs on your personal wealth points out Shelly Banjo, a writer for The Wall Street Journal.
Kindred business minds
Since you're dealing in your future well being, it's important that your advisor not only thinks like you when it comes to risks and investments but actually thinks of you when it comes down to crunch time. If you're both on the same page in terms of what kind of growth you want to see and your advisor is rational about the strategies he or she uses to meet those goals, you'll be able to work together on initiatives and discuss more potentially advantageous options of which you were previously unaware.
One of the best ways to locate good people like these is to talk to friends and family who've dealt with building a financial plan and linking up with an advisor. Word-of-mouth, as many business owners can attest, is great for referrals. As Entrepreneur magazine points out, even if you don't know anyone off-hand who's sought or used a financial planner, there are plethora web resources with user reviews, ratings and rankings – PlannerSearch and the Nolo Lawyer Directory are two recommended sites.
Check their credentials
Past performance can be an indicator of future success. Wealth Management Insights points out that an advisor's training should relate directly to the line of financial investment advice he or she is offering, so if your potential guide majored in nanotechnology or creative writing, chances are they may not be prepared for the investment world.
That's not usually the case, but other benchmarks can indicate certifications, past specialized training and overall performance with other clients' assets. Looking at previous work can also help decipher what makes an advisor's brain tick, according to The Wall Street Journal.
"Take your worst investment and evaluate how [the advisor] made the investment, monitored it and the decisions [he or she] made along the way to stick with it or get out," suggested Greg Rogers of RayLign Advisory in the Journal interview. "What you're really after is how the advisor processes decisions."