Making the Search for a Financial Advisor Simple for Young Adults

Group of young professionals at a meeting

Getting started with investing is a great step for young adults. After all, retirement is something you need to start thinking about now. For most of us, it still makes sense to work with a financial advisor on these endeavors.

While you may feel pretty comfortable with your financial knowledge – check out these simple budgets for young adults to get you started – there’s something about stocks and bonds that can still feel confusing or intimidating. My finances are now one of those things I take very seriously. I’ve got nothing against the do-it-yourself and online routes (which are becoming more popular), but l know I’ll prefer to entrust my investing with a professional. Here are some points to consider before finding the perfect financial advisor for young adults.

Should You Use a Financial Advisor?

Do you need a financial advisor? There’s not a magic number of assets you need to get started with a financial advisor. However, if you’re concerned about potentially making a mistake, or you don’t feel comfortable making decisions about investments, it may be time to seek out professional help. A financial advisor can also help you create a plan for retirement, as well as other financial goals.

How Does a Financial Advisor Make Money? What Is the Pay Structure?

There are three primary ways that financial advisors can make money:

  1. Fee-only – A fee-only advisor charges either an hourly fee, a retainer fee or a flat fee. The benefit of going with a fee-only advisor is that they don’t have a financial stake in the suggestions they give you as a client.
  2. Commissions – Some financial advisors earn commission when they sell services, like insurance, investments or loans.
  3. Commissions and fees – Also known as “fee-based,” this form of payment is a mix between commissions and fees. While they will receive a commission from selling services, they’ll also require fees for certain plans.

Depending on the specific advisor, the fee structure may vary or include other fees, such as management fees. Make sure you ask about these fees when speaking with a prospective financial advisor.

The Search for a Financial Advisor

Get recommendations from Friends, Family and Coworkers

When looking for a financial advisor, start with your inner circle. If your family and friends are willing to share some of their investing habits, ask around to see if they’ve worked with a skilled and trustworthy financial advisor. Word of mouth can be a great way to find the right person for the job.

Group Advisors or an Independent Wealth Manager?

Like any industry, there are many options for financial advisors. You can go with someone at a large company or a small local shop. Both have perks and drawbacks. For instance, while a smaller firm may be able to provide a more personal touch, they may not have the same level of resources at their fingertips as a bigger firm. Whatever you choose, make sure that your advisor(s) focus on both your current investments and the planning that’s required for retirement.

Preparing for Your Visit with a Financial advisor

Find Out What Services the Advisor Provides

Does their service include online statements and updates?  How often will you and your advisor perform portfolio? Make sure you’ll get all the services you need for saving and investing – you’re the one paying for it, so make it worth it!

Does the Advisor Have Credentials and a Record of Integrity?

  • DO: Check the background of the advisors you’re considering
  • DON’T: Give your money to strangers

Advisors have to obtain something known as a Form ADV, and if they’re not properly registered, they won’t have one. If you found the advisor via a recommendation, ask if the person who suggested them has already completed this precautionary check. This acts as a background check on financial advisors.

Make a Detailed List of Your Goals for Investing and Saving

Don’t go in unprepared. It’s unlikely that a financial manager would poorly advise you, but it’s wise to have a rough plan. Do a little research in what type of investing would benefit you, while remaining within the realm of your budget. When it comes to retirement planning, it’s probable you know roughly how much you’d need to spend your twilight years comfortably. Also note an amount of money you’d be currently looking to invest in stocks, bonds or mutual funds.

If you have emerging plans of long-term expenses like purchasing a home or car, or perhaps getting married and having kids, share this as well. Knowing all possible information will help an advisor get an educated idea of how to point you in the right direction.

Questions to Ask a Financial Advisor’s Office

Ask How Many Clients They Have

Besides getting an idea of how much individual attention your portfolio will receive, finding out how many clients the advisor has will indicate the likelihood of building a more personal relationship. It’s kind of like a university setting – would you rather sit in a class of 499 other nameless students or actually get to know a professor in a small group of 25?  It’s not to say your portfolio won’t excel through an advisor that has many clients, but I find it crucial that I’d have the chance to get to know someone I’d be entrusting my money.

Ask About Diversification

Diversification is the technique of mixing many types of investments into your portfolio, specifically for the purpose of minimizing risk. Asking your advisor about diversification will give you a little insight toward what is and isn’t performing well for other clients (and the advisor), if they hold similar goals to yours. In addition, the advisor will consider your age as a factor in the amount of time your investment will have to grow. He or she may suggest a financial plan that will blossom at a better rate over a greater period time, as opposed to a path recommended for someone getting a later start in building their portfolio.

After you’ve chosen someone you trust, here are a few additional topics to discuss with your financial manager, apart from portfolio administration:

  • How do I set a realistic budget for my starting salary?
  • How can I start building good credit?
  • I’m a little behind in paying off student loans. What can I do to catch up?

If you’re young, fresh out of college and attempting to manage your finances away from mama and papa bear, there’s no better time than now to consider taking your investing and saving possibilities to the next level. Are you a young professional creating a solid portfolio with the help of an advisor?  Tell us about your experiences with a financial advisor!

The post Making the Search for a Financial Advisor Simple for Young Adults appeared first on ZING Blog by Quicken Loans.

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