Here are things to consider while hiring a financial advisor

• Follow

Financial planning is a difficult process of defining life goals for yourself and your family such as buying a home, saving for your child’s education, planning for your retirement, etc. Proper financial planning can help you with good money management to achieve your dreams and at the same time, it enables you to neutralize the impact of various uncertainties.

The right financial planner can help achieve these goals. But finding a financial planner who can help define and achieve your goals is a task. Here are five things to look out for in a good financial advisor.

1. Talks openly about risk: Most investments come with a degree of risk, and it’s almost always the case that the higher the risk, the higher the reward. Any advisor who tries to downplay the risks associated with investing is effectively doing wrong by his clients. A good advisor will not only talk about risk but run numbers showing you what you stand to gain and lose in different market scenarios.

2. Transparent on fees: Financial advisors have to make money, and they can do that in several ways. Some earn commissions based on the investments they sell. Others earn a fee that’s calculated as a percentage of assets under management. There are also those advisors who take a hybrid approach between the two. Commission-based advisors are often tempted to push certain investments over others because they come with higher commissions. But in reality, it almost doesn’t matter what your advisor’s compensation structure is as long as he’s completely open and honest about it.

3. Tries to educate you about investing: Some advisors tend to show off their knowledge by suggesting complex investment options. A good advisor won’t just try to sell you a certain stock or mutual fund; he’ll explain all available options in detail and encourage you to learn more about what each one will give the returns.

4. Regular review of portfolio: A good advisor will call you at regular intervals and keep you updated with the performance of your investments while, some advisors have a tendency to meet with their clients only when they have new investments to push, or are looking to talk their clients into investing more money.

5. Understands your goal: A good financial advisor will take the time to understand your personal goals and create a financial plan with your inputs that work for you. Also, a true advisor will keep looking for better opportunities from time to time if the planned portfolio fails to give fruitful returns.