How To Get Your Best Financial Advice

(Forbes) -- During times of elevated stock market volatility, most retail (and even institutional) investors get the idea to seek out some counseling.

At best, this takes the form of finding a so-called “financial advisor” to give reassurance or modification recommendations to whatever program or strategy (or lack thereof) that you find yourself currently engaged in. At worst, you risk taking the recommendation of someone who's just selling you a product.

Taking the leap to accept outside counsel on your financial matters is a very serious affair. In my new book, Success As A Financial Advisor For Dummies, I go into great depth on these points for the benefit of training new advisors.

Here are just two questions to ask yourself to keep you on the path to getting the best advice for your situation, regardless of any market cycle.

1. What does the financial advisor initially ask you about?

If, after just meeting someone who offers to give you financial advice, they start talking about specific mutual funds, portfolio solutions, annuities or other insurance products -- just move on.

You’re not dealing with a financial advisor in this instance but, rather, a financial product salesperson. Salespeople could serve an important role in the financial services industry, but only if the average client had a better understanding of what belongs in and how to go about holistic financial planning. Only then would salespeople find that their wares are being properly and independently evaluated for a financial plan’s inclusion.

But we don’t live in such a world. As a result, choose an advisor who maps out for you the precise process that they will go through to assess your unique financial objectives and goals relative to your income and asset means.

This process should spend quite a bit of time seeking to understand not only you as a person but also how your household operates, your income and expense outlook and other material matters.

Often, clients have blind spots in their own financial lives, and a great financial advisor can bring those to light for further consideration. Managing around unseen or unrecognized household income or asset liabilities is the mark of a solid financial advisor.

2. What professional licenses or affiliations does the advisor have?

The financial services industry is very big and diverse.

There are more than 150 professional designations itemized on FINRA’s website. If your would-be advisor has one of the listed designations, that could be promising. However, follow it up by running their professional background report. You can do this for free at BrokerCheck by FINRA. In it, you’ll see any and all actions brought against the advisor and any other disclosed events.

If an advisor does not have a BrokerCheck report, then they don’t even have a FINRA or SEC registration.

Put simply, this means that that advisor does not have a license to transact in any type of securities rade or investment advice. By not having licenses in this area, the scope of advice regarding a financial plan implementation will be restricted to specific planning areas, like life insurance. Again, there’s nothing wrong with salespeople focusing on a specific product, but that assumes that you know what you're looking for to fulfill your own financial plan.

Knowing the background of someone who aims to give you financial advice is basic. I’m constantly surprised when clients tell me they’ve never seen such a formal BrokerCheck report before from their previous advisor. In our practice, we provide one to each prospective client as routine.

While these two points may not satisfy your desire for financial advice that makes you rich overnight, it should put you on the best track to working with a professional whose interests and compensation is aligned with your financial outcome down the road. Like having a family doctor, dentist or lawyer, the family financial advisor can be a great asset you have when going through stressful stock market swings.


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