How Can You Trust Your Financial Advisor?
When matters are related to investing and planning for the future, a number of us need external help, and it is quite common for us to approach a financial advisor. Consumers have been increasingly approaching financial advisors for assistance ever since 2010 until 2015 when the numbers saw a significant increase in the numbers of people who were looking for advice. Despite the increase, it is presently estimated that nearly 63% of the American population feel that the laws presently being enforced do not provide them significant protection from shady practices employed by financial advisors.
It has indeed been proven in 2016 that nearly 7% of financial advisors had been involved in instances of misconduct, which included negligence and fraud. It simply means that in the world of financial advisors, it is not difficult to find a basket of bad eggs and trying to deal with one will mean you are risking your finances into the hands of a person that is not reliable. In these conditions, how will you be able to trust a financial advisor and what are the qualities you should be looking for. Let us give you a few pointers, which can help you make a proper decision.
The Financial Advisor Chosen Does Not Hesitate To Speak about Risks
Making investments is a risky business, and you could very well receive the information that your rewards will be higher if you are willing to invest in high-risk ventures. The financial advisor that is trying to underplay the risks associated with the investment is possibly not giving you the right information. A good financial advisor will not hesitate to talk about the risks but will be making additional efforts to make you understand how you can gain or lose in market scenarios of different types.
The Financial Advisor Is Clear About The Fees You Are Required To Pay
Financial advisors are in the business of making money, and they have several options to achieve their objectives. Many earn commissions on the investments they are selling while others are charging fees, which are calculated as a percentage of the assets being managed. You can also come across financial advisors that are trying to combine the two.
Many people have shown a marked preference for dealing with commission-based financial advisors because the fees are linked to the performance of the assets being managed. Regardless of the option, you choose, it is essential for you to understand the compensation structure of your financial advisor. You must make an attempt to get a clear understanding about the fees you are required to pay and your financial advisor must be prepared to give you the information.
Your Financial Advisor Educates You About Investing
As an average individual, you would not have enough information about many of the financial terms, which are being used in the market and most financial advisors are happy to throw around such terms to make you believe they are experts at the business.
However, it does not indicate they are experts but rather will raise questions in your mind. A financial advisor that is confident will explain your options clearly and encourage you to learn more about the options that are being offered.
Your Financial Advisor Will Have Regular Meetings With You
After handing over your portfolio to your financial advisor the last thing in your mind would be to forget it. Some financial advisors have a tendency to meet their clients just when they have new products to sell or are looking to advise their clients to invest more money. You should be dealing with a financial advisor who is prepared to discuss your investments along with any concerns which you may have and also ask for a review of his or her performance.
When looking to find a financial advisor that you can trust these are some points which you will have to consider especially if you are trying to build a long-term working relationship.
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