If there is pressure to decide on a significant investment, such as a house, there is a distinct possibility of finding someone to provide advice about financial aspects. It is the same as getting overwhelmed with the financial details after the birth of a child, major illness, wedding, divorce, or the death of a family member.
Financial advisors and planners like those from Newark Group Japan help someone manage their financial life, specifically using multiple strategies like investments and services to improve financial habits and manage their wealth.
Why it’s important to work with a financial advisor
Recent research from the Financial Industry Regulatory Authority (FINRA) shows that people who work with a financial consultant are twice as likely to say they’re on track to meet their goals for retirement. The same study found that an overwhelming majority of survey respondents—91 percent—said they were satisfied with hiring a financial consultant.
But finding the right person can feel like a daunting task. After all, you’re trusting someone else with your money or at least some of it so this is a decision you want to get right.
Finding the right financial advisor: tips from Newark Group Japan
Picking a financial advisor is an important decision, and it’s not easy. The most common way people choose their advisors is through word of mouth—a friend or family member has a good experience and recommends their advisor to you.
Many people also rely on referrals from other professionals — accountants, lawyers, and so on. But what if you don’t have any referrals? How do you pick a financial advisor?
Determine what level of financial planning you need. Are you looking for a full-service advisor to manage your investments or someone simply to create a financial plan? You’ll generally pay more for the ongoing management of your investments. A financial plan can be anywhere from $1,000 to $10,000 depending on complexity.
Remember, not all financial advisors are the same because some specialize in types of clients, specific practice areas, and strategies and products. Some can help manage the taxes or estate planning, provide legal advice to business owners who are just starting a business, or just simply focus on retirement planning. So, there is surely an advisor who fits a specific need perfectly.
Here is a list of questions that should be asked to the right financial advisor before deciding if he or she is the perfect one to trust. This list has been put together by Newark Group Japan, a leading provider of investment strategies in Asia.
What financial advising services do you offer?
Licenses, credentials, and areas of expertise are all factors that determine the services that a certified financial advisor can provide. Planners cannot sell security products like stocks, or insurance without proper licenses. And they cannot provide investment advice unless registered with federal authorities or the state.
Many advisors specialize in a specific area such as retirement planning, estate planning or insurance. If you have a general idea about the kind of advice that you need, then ask an advisor if he or she has experience in that area. You can also ask the advisor if he or she provides the services that you need and, if not, whether he or she can point you toward a colleague who does.
What’s your approach to financial advising?
How advisors approach their work is just as important as the services they offer. If your goals are to save for college, you want an advisor who will focus on that area and won’t try to sell you other products.
What experience do you have?
Just simply ask for a short description of the financial advisor’s work experience and how it is associated with their current practice. Potential financial planners must have at least three years of experience in planning.
What type of clients do you usually handle?
Some planners choose to work with clients whose properties fall within a particular range, that is why it is necessary to ensure that the financial advisor is a perfect fit for the financial situation.
In what way will I pay for your financial advising services?
Advisors can be paid in different ways, either through commissions, fees, or a combination of both. And as part of the agreement, the financial planner should make it understandable what type of payment they would prefer for the services that they provide.
A fee-only financial advisor earns money by charging hourly fees or flat project fees for advising clients on their finances. The cost of working with a fee-only advisor can range from $100 per hour to $5,000 for a comprehensive financial plan and ongoing investment management services. Keep in mind that fee-only advisors don’t earn commissions on products they sell and so aren’t motivated by those commissions when recommending products to their clients.
How much do I have to pay you for the service?
Even though the payment will depend on a particular need, the planner should be able to give you an estimation of possible costs based on the service that will be provided. The cost should include the financial advisor’s flat fees or hourly rates, or the percentage of the commission collected on products you might purchase.
Have you experienced any unethical or unlawful actions in your career?
The state insurance and securities department, the Financial Industry Regulatory Authority, and the Certified Financial Planner Board each keep records on the disciplinary history of financial advisors and planners. Professional financial planners are subject to disciplinary action if they fail to comply with the Certified Financial Planner Board standards.
Investigate credentials and certifications.
A certified financial planner (CFP) designation requires rigorous training and experience, and advisors must adhere to a strong code of ethics. There are other designations as well: ChFC (Chartered Financial Consultant), CFA (Chartered Financial Analyst), PFS (Personal Financial Specialist), etc. Many people hold multiple designations, so don’t get too hung up on anyone’s designation as though it were the “gold standard.”
Finding a professional financial advisor that can help invest for a brighter future is one of the top decisions that should be considered in life. However, it is not an easy task. Before establishing a partnership with a financial planner, we need to make sure that they perfectly fit our needs.