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While we support DIY financial management, there are moments when hiring a financial planner can be the right decision. If you go down that path, Certified Financial Planner Jeff Rose recommends asking one crucial question: “How do you earn your fees?”
There are plenty of questions to ask when interviewing a financial planner. You’ll want to inquire about their track record and past client results. In a video for GOBankingRates, Rose also advises asking how they make their money and expects a straightforward answer.
Financial advisors can be compensated in various ways. Some work on commission, others charge fees, some are fee-only, and some use a combination of these methods. So when you ask a financial advisor how they get paid, expect a clear and understandable response. If their answer isn’t clear—or doesn’t make sense to you—do you really want to hire someone you don’t understand financially? Probably not.
NerdWallet has previously highlighted this issue, emphasizing that a reputable advisor should openly explain how they make money. If they refuse to do so, it could be a sign to reconsider. NerdWallet also elaborates on how advisor fees work, and Rose provides more insights in his video linked below.
Image courtesy of geralt.
