The world of finance has had a rollercoaster of ups and downs since the financial crisis of 2008. That event changed the financial and mortgage industries substantially. There are risks in trying to manage even the smallest of financial portfolios. While the nation is on the way to recovery, today’s investors need guidance on the best tools and strategies to keep their money safe and make it grow.
Career-minded individuals know that financial planning can be a prosperous and rewarding vocation. Not all of them have the necessary training and experience, so it’s wise to shop around to find someone you can trust.
A qualified financial advisor needs to have a strong background in the financial industry. Most financial advisors will hold at least a four-year degree in finance, accounting, or financial planning. In addition, they’ll need to meet the Texas state requirements to practice as an independent financial advisor, which includes one or more state-licensing exams. The types of products they plan on selling will determine which licenses they need to obtain. Advisors must renew their licenses annually, so be sure that your advisor’s license is active and up-to-date.
Another important factor to consider is understanding the type of fee structure that pays the advisor for their services. There are three fee structures including:
Fee-based Commissions Fee and commission
The fee-based model gives your financial advisor a small percentage of your holdings on an annual basis. The larger your investments grow, the larger fee your financial advisor gets. Advisors who get a straight commission are paid by the companies they represent, which means their decision to offer you certain products may be subjective and may or may not be in your best interests. Insurance products are generally commission-based. The fee and commission structure is used by financial advisors who offer a combination of investment and insurance products.
Houston is home to dozens of financial advisors. Narrow your search to a few and make a visit to meet them in person to ask about their education, experience, and licensing. A financial advisor should be interested in learning about your short and long range financial goals, including your insurance, long-term tax planning, and short-term savings goals. Below are a couple of resources to get you started.
One way to find a financial advisor is to perform an online search on the website for the National Association of Personal Financial Advisors (NAPFA). NAPFA is fee-only and their members work under a fiduciary (best interest of the client) standard. None of their members accept commissions. NAPFA does offer a Find an Advisor feature for consumers to use to find NAPFA members (approximately 2,600 members strong at this time). Their database has access to financial professionals who meet the highest membership standards for professional competency for client-focused financial planning. The site also offers tips, tools, and a finance blog. You may want to ask prospective advisors if they attend the NAPFA annual conferences.
Barron’s magazine offers regular informative articles on the latest investing tips and trends. Barron’s grades the stocks and lists the ones to watch. The magazine also highlights annual top lists of advisors and advisor profiles.
Investors are likely to have regular communication with their advisors, so personality counts too.
Be sure to conduct a brief meeting once you narrow down the list of financial planners you are considering to see how you like them. Financial planning is anything but one-size-fits-all, so look for a good listener, take some time to think it over before you decide, and then work with your planner to shape up your financial future.
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