Choosing a Financial Advisor: Key Questions to Consider

By Elina Furman

Financial Advisor: Key Questions to ConsiderStopping to ask for directions has always been a woman’s strength, so it should come as no surprise then that nearly 40 percent of women depend on financial advisers, according to the Money Magazine/Oppenheimer Funds Women and Investing survey. Here are some tips on how to choose a financial advisor.

But what about the rest of us? The idea of handing over control of our finances can be a very scary proposition for women. And with so much competing information and so many people vying to get control of your hard-earned dollars, it’s no wonder so many of us are confused. Here are some key questions to consider when choosing a financial planner that’s right for you.

1. Do You Need One?

A financial advisor isn’t for everyone. If you have a good strategy, a sense of your long and short-term goals, regularly contribute to a 401K, and are happy with your portfolio’s performance, you may not need an advisor just yet. Still, even if all of the above is doing well, you might want to look into finding an advisor to help you maximize your earnings. Not only that, advisors can help you figure out tax advantages and retirement plans that you may not have even considered.

2. Who Do Your Friends and Family Know?

When it comes to finding an advisor, your first step is to ask friends and relatives for their recommendations. After all, they wouldn’t steer you wrong. Of course, you don’t want to take their word at face value. While one advisor may work for them because of an aggressive strategy, he/she may not be the optimal choice for your more conservative investment approach. It’s very important to double check and call several references before making a decision.

3. Is the Advisor Sensitive To Your Needs?

As a single woman, you have specific needs and a particular lifestyle that needs special attention. If you’re young and just starting out, you can afford to be more aggressive in your investment strategy, including maximizing investment in international stocks. That’s why you may need to look for someone who is comfortable acting aggressively and not pulling out when the chips are down. Also, since some of you don’t have children, you can be more aggressive in your savings strategy as well. Since we live on average six years longer and get paid 30 cents less per hour than men, for most single women, pension and retirement are going to be major concerns. That’s why it’s very important to discuss you individual lifestyle choices, fear, and concerns as a single woman with your advisor. If you feel they understand your choices and lifestyle, then you might have found your advisor.

4. How Much Experience Do They Have?

When assessing your investment planner, one of the keys factors to consider is how long they’ve been in business. Your best bet is to find someone who has over five years of experience. If you’re looking to work with a wealth manager, another question to ask is how much funds they have under their management. A good rule of thumb is if your advisor manages $50 million or more. To verify how long your advisor has been in business and their level of accreditation, contact the National Association of Personal Financial Advisors (1-888-333-6659) or the Financial Planning Association (1-888-806-7526).

5. How Do They Charge?

The more experienced the advisor, the more they will charge. If they have a good track record, you’ll have to prepare to shell out more dough than for someone just getting out of business school. The other important factor to consider is the fee structure. While some advisors earn their living by charging fees, others do so by receiving commissions from the companies they recommend. And still others combine the two methods. It’s very important to ask about this since many people prefer to pay a fee than for their advisor to receive a commission. If the advisor is too dependant on payments from companies, it can create a significant conflict of interest since their advice may be biased by their desire to make a profit. Remember, the quality of advice you get should never be dependent on a commission.

6. Do You Click?

As with any relationship, chemistry will play an important role in the advisor you choose. No matter what your level of financial knowledge, your advisor should never talk down to you or make you feel as if you’re not as important as all their other clients. Many people, including men, don’t understand basic investment terminology like EBITDA or P/E ratio, so make sure your advisor is willing to explain their strategy in a non-condescending manner. You’ll also want to ask about their desk-side manner. How often do they call their clients? Will you get regular emails with recommendations? When is your advisor available? Remember, your financial advisor is working for you and regular, honest, and timely communication is one of the prerequisites for building a relationship you can trust.

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