How To Choose An Investment Advisor

How To Choose An Investment Advisor

Investment advisors are professionals whose aim is to help clients with financial goals. They give advice on how to save, invest and grow your assets. The services investment advisors offer range from money management, investment management, tax planning, estate planning and risk management. 

Investment advisors, on the other hand, make their money in three main ways;
– Commission-based pay: Commission-based investment advisors earn their keep depending on how many trade executions they make. Their fee is added on to the amount traded such that if you were to buy shares at $1000 and their fee is $100, you would pay $1100 for the shares. 
– Salary plus commissions: Most investment advisors, especially those in banks and insurance firms, usually have basic salaries and get bonus pay depending on how many trade executions they make. This is most common to investment brokers.

– Fees: Other investment advisors directly charge their fees depending on the type of services offered. The fees may vary depending on whether it is a one-off trade or asset management.
The more money you make, the more complicated and difficult it becomes to keep track of your finances. That’s where an investment advisor comes in. 

Here are four things to consider when choosing an investment advisor;

1. Understand Your Own Financial Needs

The best way to settle for an investment advisor who is most suited to you is to first understand your financial needs. The reasons for an advisor could vary from starting a business, an inheritance to retirement. It is important to note down your financial goals before opening an investment account.

2. The advisor’s qualifications

Professionals in the investment management industry are usually required by law to have certain qualifications before they are licensed to practice. Look out for their licenses and credentials. You can also ask for referrals from people who have engaged their services before.In case the business incurs some losses or damages as a result of maybe fire, it will have to file a claim and forward it to the insurance body which will eventually asses the whole risk associated and provide an equivalent compensation to cater for the damages that projects to the terms of the policy.

3. Their expertise and experience
Most investment advisors are usually specialists in given areas of investment management. When challenged outside their area of expertise, they usually consult their colleagues who have specialised in that particular area. While it shouldn’t be a reason to write off a given investment advisor, it is something you might want to put into consideration.
It is also important to know how long they have been in practice. Age does not necessarily equal experience.

4. The overall costs

While the initial fee might seem okay, put into consideration the other costs such as commissions and see if the returns are still as promising. The best option is to always go for an investment advisor who is paid on commissions, but be keen to look out for transparency and track record.

Before settling on an advisor, it is important that you should be able to maintain mutual respect for each other. Be comfortable with working with each other towards your financial goals. Trust is important in building a respectful working relationship. Do not proceed to engage their services if you feel uncomfortable around them, even if they were referred by someone you trust on a personal level. Just because it worked out for them does not mean it is certain to work for you.

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