To manage your money effectively, it is crucial to find the right financial advisor who can also handle your family and life savings. As experts in the field, they will help you organize your finances and create a plan to maximize your financial gains. However, since they will have access to your sensitive information, it is essential to hire someone you can completely trust. Here are some important questions to ensure you find the right financial advisor.

Are you a fiduciary?
Financial advisors who follow a fiduciary standard prioritize the needs of their clients over their own. They avoid conflicts of interest by refraining from selling commission-based products. They are obligated to provide recommendations that align with the client’s financial situation and goals, even if it means earning less income. The SEC’s best interest standard is slightly less strict, allowing advisors to propose appropriate financial products while disclosing any conflicts of interest, such as commissions associated with their recommendations. However, the advisor should inform you of any such conflicts.

How do you get paid?
All financial advisors get their earnings through commissions, fees, or both. In most cases, the fee comes from the client, and there are partners who pay a commission. You need to discuss commissions with your advisor, as these, at times, lead to conflicts of interest. This is because, ideally, your advisor should suggest financial products and investments that are beneficial for you. There should not be any hidden agenda of earning commissions from these products. If your advisor states that they earn commissions, make sure they communicate these conflicts transparently to you.

What are your qualifications?
Another important aspect you would want to know about your financial advisor is their qualifications and credentials. This will give you an idea about their professional standing. As there are several certifications and qualifications, you must find someone whose experience and niche align with your financial goals. Here are a few professional financial advisor certifications you can look out for.

Chartered Financial Analyst
Certified Financial Planner
Chartered Financial Consultant
Chartered Mutual Fund Counselor
Certified Public Accountant

What services do you offer?
It’s important to understand the services offered by a financial advisor before hiring them. This is because you want to ensure that the advisor is knowledgeable and can provide expert advice in areas that align with your financial interests. For instance, if you’re new to the world of finance, you’ll need to find out if the advisor offers financial education to help you gain a better understanding of various financial products. Similarly, if you require advice on business planning, it’s important that your advisor offers this service. Additionally, if you need guidance in multiple areas, such as investment management, wealth management, retirement planning, estate planning, and tax advice, your advisor must be able to provide these services.

What is your investment philosophy?
There are several investment strategies and philosophies. Most of these come under two categories. These include market timing and buy-and-hold. Buy-and-hold involves picking financial products such as mutual funds and sticking with long-term gains. This strategy is for those investors who are not risk-averse and would like a stable portfolio. Market time strategy involves products with short-term gains, such as stocks expected to give high returns quickly. These are generally high-risk. So ask your advisor what strategy they follow and check whether this is compatible with your goals and risk capabilities.

What will be your total fees?
Before you hire a financial adviser, it is important to understand their fee structure. You need to get a clarification regarding the various costs involved in their fees. Even if they are 100% fiduciary, there has to be transparency about the fees. Here are a few types of fees you may have to pay when you hire a fiduciary financial advisor:

Advice fees
These are usually charged on a per-hour basis. Some advisors charge these as a percentage of investments done for you or as one-time project fees.

Expense ratio
This fee is for an exchange-traded fund (ETF) or a mutual fund. It covers operational expenses annually.

Transaction fees
These charges must be paid to a custodian whenever your financial advisor does any transactions on your investments for you. A custodian is a financial institution that holds your securities and other assets.

What investment benchmarks do you use?
Financial advisors generally use benchmarks directly related to different kinds of investments. These benchmarks give an idea of how your investments are performing. These also indicate how successful your advisor’s investment strategy is. These standards are used to compare your investments against the broader market. For example, if you invest in a large-capitalization stock portfolio, your advisor should use benchmarks such as the S&P 500 Index (S&P 500) or Dow Jones Industrial Average (DJIA). Or if you have bought technology stocks, your advisor probably uses Nasdaq Composite Index as a benchmark.

Who will have access to my information?
In light of the increase in financial scams, it is crucial to protect your private information, especially your financial information. It is important to inquire with your financial advisor about their security protocols, as they can access sensitive data. Familiarize yourself with the individuals on their team who are authorized to access your confidential financial information, as well as the purpose for such access.

What tax hits will I encounter with your investment strategy?
Ask this question to determine if your advisor has taken your tax bill into account when making financial decisions on your behalf. For example, if your advisor manages your money through a taxable account, you must pay annual taxes, interest, gains, and dividends. A responsible advisor will typically suggest the most tax-efficient strategy for you and will calculate tax estimates before recommending any investments.