Financial advisors help you with not just wealth management or investment but, they also help out with taxation, budgeting etc. Here are some important questions you must ask before hiring a financial advisor.
New Delhi: For people who are able to track their income and expenses easily and manage their finances efficiently, hiring a financial advisor is almost never a thought. It is not necessary for people to hire a financial advisor just because they are struggling with debt or financial issues, anyone who wishes to make the most of their money should hire a financial advisor. A professional financial advisor can help you manage your money more efficiently and even suggest ideas that will help you let your wealth grow by earning good returns on it.
Hiring a financial advisor is not an easy task. Since you will be entrusting your earnings to someone, it is important to ensure that the person is qualified and has a certified financial Certified Financial Planner (CFP) certification, awarded by the principal licensing body in India, Financial Planning Standards Board (FPSB). If the person is also a CA or MBA professional then it is a bonus but just this criteria is not enough to hire someone. One must have a proper interview and ask some very important questions before hiring the advisor.
Here are some questions which you must ask before you hire a financial advisor:
1. How much do you charge?
This question is important as you must know how much you will have to pay for their services and if the fee is justified. You must also ensure whether the advisor is just charging a flat upfront fee or a percentage of the asset under management. Also, inquire whether they charge a minimum fee even when you are not availing their services.
2. Whether they get paid for selling products?
If the advisor earns a commission on selling some products then there are chances of a conflict of interest and you cannot be sure that whatever they are suggesting is genuine and not out of some personal gain motive. If they are paid for selling a product, chances are that they will push you to buy some of those products even if they won’t help you earn good returns.
3. A sample financial plan?
In order to get a glimpse of the efficiency, you should ask for a sample financial plan which resembles your current financial status to a certain extent. This can help you understand whether the advisor’s suggestions fall in line with your financial goals. If his advice is not tailored to your needs then hiring him would be a waste of money. Even if the financial planner has a good history, if the advice is not according to you, the result might not be as fruitful as you expect.
4. What services do you offer?
Some financial advisors only offer services like wealth management and investment advice but there are other advisors out there as well who provide more services like goal-oriented investment advice, insurance advice, budgeting plan, taxation and estate planning as well. You might have to pay more for all the other services and so it is better to inquire about the services they offer.
5. What is your investment strategy?
It is important to ask this question because if your financial advisor’s investment strategy is aggressive compared to your risk appetite it can prove to be a huge problem. Make sure that your potential advisor’s investment strategy fits your needs, risk appetite, financial goals.
There are a few other questions you can ask like:
1. How do you calculate the returns?
2. Can I know your client history for reference?
3. How often will you revise the financial plan?
4. How often can we meet to discuss the financial plan and strategies?