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When you first realize that you need a good financial professional to help you out with your particular situation, it might strike you as a rather obvious move. On the other hand, once you start considering the specific aspects you need a financial professional to have, you can quickly start getting bewildered by it all.
Logging online and starting to read about this is a good move, but you can also get quickly inundated with the sheer amount of information out there on the subject of financial education. Once again, your mind can spin out, and you’re still left wondering how to move ahead. You need a good balance of information when you start dealing with the financial industry, since you need to move ahead with a healthy dose of skepticism to protect yourself while also having the peace of mind that you can find someone useful to you and your family.
Your eventual financial success, or lack thereof, will ultimately be the consequences of the decisions you make along the way more than anything else. Keep reading to learn 20 aspects about the financial industry that you should know when looking for a good professional or advisor:
1) Not Every Financial Professional Is A Financial Planner: Most financial professionals have acronyms after their name on their website, business cards, and letterhead. These letters can tell you a lot about their professional specialization and particular credentials. If overall financial planning is what you’re looking for, then be sure to pay attention to anyone with the CFP marker. This designation stands for Certified Financial Planner.
2) Know Your Needs First: You need a financial advisor that isn’t just good at what they do, but also someone that will be good for you. In order to find that, you need to have some idea what particular financial needs and objectives you have before you start consulting candidates. You don’t have to have everything spelled out chapter and verse, because that’s largely what they’re going to do for you, but you can narrow down the field by knowing what you hope to do in life so you have better odds of finding someone that suits your own needs.
3) Don’t Trust Guaranteed Returns: Any financial professional who claims that they can guarantee you particular returns is lying, either to themselves or you, or even both. Don’t use them. If you come across someone that claims that they can actually beat the market, then run away from them as fast you can. No one can do this, ever.
4) Look Out For Conflicts Of Interest: How any financial professional gets their compensation will reveal a lot, so ask them how they get paid. They’re required to disclose such information openly and honestly. Those professionals working for commissions are compensated by products or services that they sell, instead of any advice they provide. Fee-only fiduciary advisors are only paid by offering you services which emphasize your best interests and not theirs.
5) Insurance Is Crucial But Tricky: Having the right insurance is essential for success in your financial life. However, you also need to move with caution. You really shouldn’t go without it, but you also probably don’t get really excited about shopping around for it. Many financial professionals are eager to sell you insurance. However, you need to be aware of your needs so you don’t waste your time and money on a policy that really doesn’t meet your needs.
6) Market Turbulence Will Tell You How Good A Financial Advisor You Have: All financial professionals look great when the markets are rocking strong. However, it’s not until they tumble that you find out just how good your advisor is. When you start seeing how your advisor’s strategy holds up against a market downswing, then you’ll know just how well they’re doing.
7) Nobody Know What The Future Holds: If you’re spiritual or religious, you might believe in certain entities and/or deities that know, but mortal human financial advisors aren’t that high in the pantheon of life in the universe. Be suspicious of any financial professional that says they know what the future holds for the economy and money, whether it’s next month or a dozen years into the future.
8) Don’t Mind The Financial Media: The world of financial media includes newspapers, cable networks, TV shows, and a lot of online websites, forums, blogs, and podcasts. They’re often consumed with the day-to-day fluctuations of the markets, but you really shouldn’t pay attention to all that. An appropriately diversified portfolio lets you ride through the twists and turns of shorter market cycles without stressing over daily performance.
9) Any Plan Is Your Best Bet Of Future Financial Success: If you don’t have a plan for where you want to head financially, then you’re going to just follow the tides you’re already in. Just creating a plan won’t assure your future success, but it’s also the biggest indicator of achieving financial stability.
10) Time Is Your Enemy…And Your Friend: In terms of achieving financial independence, time is a great ally, but also a powerful antagonist. You need to start saving as early as you can if you want to take advantage of compounding interest. If you wait too long, though, and you might not have enough time left to accrue a good retirement savings. Even tiny amounts saved start the work, but you get nothing from having no savings.
11) As stated by a CPA in Southern California “A Financial Professional is Not The Same As A Fiduciary: Any financial professional that isn’t an actual fiduciary is probably someone involved in product sales.” If you want someone that has to focus on your best interests, then you need a fiduciary. Financial professionals that sell financial products get their compensation through their commissions. That means that they have obvious conflicts of interest, and these don’t favor you as their client.
12) Look For Someone That Walks Their Talk: Anytime a financial professional advocates a certain practice, ask them if they themselves or their family already does what they’re suggesting to you. If they don’t, then that’s a warning sign. Always inquire how much of their money they invest in the ways they suggest to you.
13) Financial Professionals Who Educate Also Empower: When you have a financial advisor that helps you learn about money matters, you have someone that is empowering your success over time. When you’re better educated about financial matters, you’re better able to make good choices when it comes to your money.
14) Simplicity Often Trumps Sophistication: Complex financial formulas and strategies are harder to implement and keep up with. More moving parts means more opportunities for things to go wrong. Keeping things simple isn’t just easier, but more effective.
15) Zero Risk Doesn’t Exist: Any kind of investing is going to involve some level of risk. While many forms of investment might be safer than others, risk is always present to some degree. Get a good understanding of how much risk you’re willing to tolerate and learn just how much risk is involved with any particular strategy prior to deciding for or against it.
16) DIY Financial Success Is Possible: Robo-advisors, self-help books, and online tools offer low-cost ways of creating a diversified portfolio on your own, but possibly only to a certain point. You might reach a day where your finances have grown past a point where you feel comfortable managing them on your own. You might also start wondering if there’s more you could be doing to make the most of your money. In either case, the time has come to find a financial advisor.
17) Become Friends With Index Funds: Index funds are tremendously powerful ways of keeping your portfolio costs low. They’re also very effective in capturing the returns of efficient asset classes.
18) Financial Planning Has To Include Tax Planning: If you want to make the most of your wealth so you can apply it to what is important to you, then you need to legally shelter as much as you’re able to away from paying taxes.
19) Bad Things Happen: You can’t let the possibility of bad things or unexpected surprises keep you from trying to create the financial life of your dreams. Things will happen either way. As long as you do some planning, you can at least be prepared for what you can’t anticipate. The right-sized emergency fund is a good safety net for maintaining your finances when things don’t go as planned.
20) Good Things Happen Too: You’ll eventually hit lucky breaks and come into windfalls that help out your finances as much as bad shocks hurt you. Be ready for both.
In Conclusion
In terms of the financial industry, you have to consider quite a few details among your many decisions. Learn all you can so you can find someone that fits you right as well as be able to start figuring out when things aren’t quite right. The choices and actions you both take and don’t are what carry you to the financial future ahead of you.
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