How to Evaluate the Performance of Your Financial Advisor

Financial advisors can help design a suitable financial plan for you to achieve your financial goals. They strive to understand your present financial situation and to provide custom solutions tailored specifically for your financial needs. As your financial advisor, they can recommend personalized strategies for saving, investing, budgeting, managing your taxes, etc. It takes effort and hard work to earn money and fulfill one’s needs. In order to do so, one needs to exercise financial control as well. A financial advisor can help you in keeping track of and managing your finances. However, it is important that you are confident in their ability to provide you with suitable financial advice.

You can assess your financial advisor based on the benchmarks listed below:

1. Conduct a background check on your financial advisor

Before hiring an advisor, it may be prudent to carry out a background check. You can do so by checking the advisor’s name in the Investment Adviser Registration Depository (IARD). An IARD is an electronic filing system for improving the governance of financial advisors that makes information about the advisors available to the public. You can verify the credentials of an advisor vis-a-vis their educational qualifications and professional certifications. Moreover, an online check reveals information about the advisor’s licensing and behavioral history as well - if disciplinary action has been taken against him/her, it’s an indication of a possible violation of rules and regulations.

2. Make an effort to understand the fees involved

When a financial advisor dispenses his/her services, they do so in exchange for fees. These fees vary from a case to case basis or portfolio to portfolio and may be paid quarterly or annually. Professional financial services are not limited to simply financial planning or portfolio management; they also include selecting private fund managers, pension consultation, amongst other services. You must also take note of the kind of portfolio review services offered by the financial advisor, as the fees could vary accordingly. Review the need for an advisor and select the services that you may need them for. This helps ensure that you do not end up paying more money for any extra services that you do not need. Additionally, don’t forget to get a breakup of the fees to know the exact amount you’re paying for the hired services.

3. Learn the difference between a sales pitch and financial advice

Some financial advisors receive commissions for any financial products sold by them, in addition to their advisory fees. These advisors may recommend the financial products from certain financial firms for their benefit and may put their interests above your financial needs. This could result in situations where the advisor faces a conflict of interest in the financial advice he provides you. To ensure you are getting the most suitable financial advice for your needs, be clear about your financial goals and find out more information on the product you want to invest in. Ask for a projection of the anticipated returns from your investment so you may better assess the suitability of the investment in line with your financial objectives. Ensure that your funds are being invested as per your preferences.

4. Pay attention to the quality of discussions with your financial advisor

Pay attention in your meetings and gauge the involvement of your advisor. Your discussion should ideally focus on your financial goals and level of risk tolerance so that your advisor makes suitable recommendations. He may also ask to review your past financial records, information about your current investments, insurance policies, as well as taxes paid by you. This helps your financial advisor create a holistic picture of your finances.

After this, the advisor will also review the data and share insights on your present financial situation. He may also advise you to make certain revisions based on the data. A lack of quality in the level of communication and personalized advice offered by your advisor could suggest that they are not a fiduciary. A fiduciary acts in your best interest and ensures your financial needs are a priority. A non-fiduciary advisor may recommend financial products that provide them a commission, and hence, the advice may not be tailored to your personal financial needs. Thus, it is important to be aware of the quality of communication with your financial advisor to ensure they are providing you with suitable financial advice.

5. Assess the performance and accessibility of the advisor

How your portfolio performs is a direct indictment of the performance of your financial advisor. Conducting a review regularly helps to know if the investment portfolio has the potential to fulfill your financial goals or not. Financial goals are generally of three types - short-term, mid-term, and long-term. Depending upon the type of goal, you must allow enough time for your portfolio to grow and fetch you returns. Being hasty may not yield the desired results for you. It is also important for you to consider the existing trends in the market while making your assessment. For instance, a change in government policies or the prevailing economic factors can also affect the performance of various investments.

Moreover, it is imperative that you have easy accessibility to your advisor. You don’t have to visit the advisor’s office regularly but he should be available when you need his advice. Even after the advisor has designed a financial plan for you, his role doesn’t end there. Due to the volatile nature of the financial market, you may require assistance and advice from time to time. Thus, it is important to take into consideration the availability of an advisor as an assessment criterion while choosing to hire them.

Time to wrap this up!

Managing your funds in a timely and efficient manner can go a long way towards helping you achieve your financial goals. Additionally, regular reviews can help you take corrective measures as and when needed to align your investments with your long-term financial goals. Thus, it is essential to have an experienced financial advisor. The above-mentioned benchmarks can help you figure out if your advisor is a fiduciary or not. Moreover, you should also evaluate the work of your financial advisor periodically. Doing this will give you the confidence in having the right professional to manage your hard-earned money.

If you’re looking for an advisor to manage your finances, use’s free match service to connect with 1-3 vetted financial advisors that are suited to help you meet your financial needs and goals.

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice. A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

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