Investing is usually an area that most people don’t want to deal with by themselves. The reasons for this are plentiful. People are obviously scared of losing money in case they make poor investment decisions. Secondly, the plethora of investment options can confuse newcomers to the stock market. Hiring a financial advisor, thus, appeals to many investors who can help them understand investing basics like trading stocks, futures charts and commodity charts among others.
However, choosing a financial advisor is no easy task. A common fear among investors is that their financial advisor would only push for investment options in order for the advisor to earn a profit through commissions. Investors who want to make the best investing decisions possible must be very careful when screening and choosing a financial advisor.
Finding a financial advisor often begins through referrals. Colleagues, friends and family members are usually those that refer financial advisors. The risk in finding financial advisors through referrals, however, is that people tend to make referrals not based on experience or competence of a financial advisor, but more on the issue of personality. People refer financial advisors that they like or that they are fond of to their friends and family members.
When evaluating a prospective financial advisor, one should thoroughly scrutinize the advisor. There are many questions that an investor can ask, such as the amount of experience and the background of the prospective financial advisor. The investor should also inquire about the style of the advisor in terms of planning and investing.
Likewise, the investor must see to it that the financial advisor would only be charging on a fee-only basis instead of commissions. It is normal for advisors that are compensated through commissions to frequently recommend transactions in order to earn more. On the other hand, advisors who are charged on a fee-only basis are likely to protect the interests of their clients by recommending only the most appropriate investments.
The advisor must also work with the investor when it comes to setting profit targets. Great financial advisors are those that show and explain various investment modes to their clients. The advisor will also write an investment policy statement that enumerates details like target returns, tax issues and risk tolerance among others.
Hiring a financial advisor may be difficult at first, especially for investors who have no idea about the qualities that make a good financial advisor. Nonetheless, the services of an advisor could be worth it in the long run. More than explaining the basics of investing and details like futures charts and commodity charts, a capable financial advisor will be able to maximize the earning potentials of his clients. For a free online advisor, visit barchart.com. This financial website offers insights into all aspects of the stock market free of charge.