When it comes to preparing for your financial future, a competent, experienced financial advisor can do wonders for your portfolio. But with all the financial advisors that are competing for your business, how do you choose the right one?
Among the many criteria to consider, four stand out as most important:
- You should only consider financial advisors that are licensed by the National Association of Securities Dealers (NASD).
If possible, go with an advisor who holds a Series 7 license since this will open up your investment possibilities to virtually everything except commodities.
If you're primarily interested in investing in mutual funds, unit investment trusts, or closed-end funds, a competent Series 6 licensed financial advisor is acceptable.
- Select a financial advisor who has been licensed and working in the financial services field for at least three years. It takes at least that long to build any kind of meaningful track record.
- You'll likely realize better investment results if you choose a financial advisor that is compensated on a fee-only basis.
An advisor who gets paid a fee instead of commissions only will be more likely to provide objective, unbiased investment advice.
Many financial advisors now operate on a combination fee and commission compensation plan. While not as attractive for the investor as a fee-only investment advisor, these advisors typically provide a higher quality of service than those who get paid on a commission-only basis.
- Ask for references and follow up with them. A highly competent and experienced financial advisor should be able to provide a fairly long list of satisfied clients. If not, there is most likely a problem and you'll be wise to look elsewhere for your investment advice.
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