Picking the right financial advisor is one of the most important life choices you can make. A good advisor can not only help boost the returns on your investment portfolio but also provide you with guidance that can enhance your quality of life.
Of course, not all financial advisors are the same. As in any industry, some are more qualified than others, while some may be a better fit for you personally.
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For those who are looking to assess the value of their financial advisor, here are some of the metrics they should consider.
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Qualifications, Licensing and Registration
Before dealing with any financial advisor, you should ensure that they are fully licensed and registered. Depending on the type of advisor you’re looking for, they should be registered with the Securities and Exchange Commission, the state where you reside or both. That’s the bare minimum, and it’s an easy hurdle to climb, as it’s unlikely that a reputable firm would hire an unlicensed advisor.
Beyond that, however, you should verify that your advisor is a fiduciary. Whereas a licensed representative is merely required to offer you “appropriate” investment suggestions, a fiduciary is legally bound to act in your best interests.
You can see the registrations an advisor has on FINRA’s BrokerCheck. Additionally, you can see how many settlements, incidents or lawsuits have been filed against an advisor, as well as what their resolutions were.
According to Forbes, studies indicate that advisors who have been sued in the past are more likely to be sued in the future, so that’s something you might want to keep in mind if you find one with a troubled past.
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Fees and Expenses
No one wants to pay fees, but they’re not always a bad thing. Fees don’t exist in a vacuum. They must be assessed in relation to the value you’re receiving by paying them.
If your advisor charges you a fee of 2% of your assets but never contacts you and simply throws you into a bunch of mutual funds, you’re not deriving any real value from that. But if that 2% includes comprehensive estate planning, outstanding investment results and hands-on service, it may very well be worth the cost.
Performance
As qualified, low-cost and nice as your advisor may be, if their investment recommendations cause you to lose money, it’s not a good sign.
Investments certainly rise and fall in value, and no advisor can avoid bear markets in stocks, bonds or other securities. But if you have an all-stock portfolio and year in and year out you can’t even keep up with a comparable index fund, it might be time to change your strategy — or even your advisor.
Accessibility
A good financial advisor prioritizes their clients. You should be hearing from your advisor at least annually, if not quarterly or more often — and always when there are great disruptions in the market or your specific portfolio.
Similarly, when you call in to your advisor, you should expect them to pick up the phone, or at the very least get back to you in a reasonable amount of time.
If you can’t talk to your advisor when you need assistance, you’re paying for a level of attention and service that you aren’t receiving.
Comfort
While probably not the most essential factor when evaluating a financial advisor, you’re likely to have a more fruitful and beneficial relationship if you work with someone who makes you feel comfortable.
If you feel like your advisor talks down to you, doesn’t value your opinion or doesn’t take your needs into account, you might want to make a different choice.
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This article originally appeared on GOBankingRates.com: 5 Key Ways To Assess the Value of Your Financial Advisor
