Red alerts when choosing a Financial Planner

While you try to meet all the ends of your life, this balancing act may take away most of your time and attention, leaving you with very less scope to cater to your financial matters. Thus, there is a substantial increase in the demand for financial advisors in the market. Choosing the ideal planner for yourself, from the huge number of financial advisors available in the market can be difficult and you may land up with someone who is not able to serve you well.

This choice isn’t always an easy one. The big question is how to know who is best suitable and who is not. This can get a lot easier by knowing which conditions you must avoid, while considering various financial planners and finalize someone whom you should trust with your money. Here are some red alerts to help you make a prudent choice:

1. An offer to Manage Your funds for “Free”: Freebies are not always welcome, especially not when you would be sharing all details about your financial assets with him/her. Generally a financial advisor can be paid in a fixed fee model or on commission terms which is a percentage of the amount of assets he/she handles. If your planner says that any part of their planning is free of charge, be wary of such transactions, because nothing ever comes free. Reliable and registered financial advisors with fair credentials would charge the justified fee for the work.

2. Claims to have outperformed the Market: Guaranteeing financial returns higher than the market average is not only close to impossible but illegal as well. A financial advisor is not allowed legally to make such claims to his clients. Some very few fund managers, who are of exceptionally high stature, may be able to get you higher returns than market average consistently, but majority of advisors can do that only occasionally and that too by exposing your funds to very high risk. Therefore try and avoid those who make such high claims and rather go for advisor you give you a more realistic picture for returns as per your risk taking appetite and time at hand and guide you through the economic ups and downs.

3. No interest in Your Financial Goals: OK. First things first, it’s your money, and what you make out of that money is also yours, therefore the primary focus in planning your finances should be your goals. The advisor must ask you about your financial goals and understand your responsibilities in life. Try to partner with someone who shares similar values as you. Also there are many planners who specialize in insurance, estate planning, divorce or retirement—a fact you might want to consider if that’s a particular need of yours.

4. Unable to build a comfort level with you: Financial planners can manage your money for you or manage your money with you. Your planner needs to understand your way of thinking and approach and get your comfort on the recommendations, instead of imposing his ideas on you. Be wary of him, if you are uncomfortable with his/her way of management. Also when you sign on with a financial planner, there will be a written agreement of how the two of you will manage your money. Read this carefully, and ask questions if you’re unsure about anything.

Again, make sure your planner has the right credentials and licenses to deal with your funds and assures to work in your best interest—even above his own—which is the bottom line when it comes to getting help with your bottom line.