When it comes to managing your financial portfolio, people have different options they can explore. Generally, there are three main courses of action that most people take. These include the person who wants to do it all themselves, the person who seeks advice online, and someone who prefers to hire a financial analyst.
First, the “go it alone” investor generally prides themselves on tackling important financial decisions by themselves. This requires a serious understanding of the financial industry and years of expertise. Otherwise, you could land yourself in a dangerous financial decision.
Next, there is the investigator. This is someone who isn’t totally confident in their investing or stock market knowledge and decide to seek the advice of experts online in a variety of forms. They may read financial forums, study articles, watch videos, and listen to podcasts on the ins and outs of finances.
Last, there is the person who has little interest in managing their own finances and wants to leave it to the experts. They find a trusted advisor and enlist their help with buying stocks, analyzing their current financial scenario, and more.
For this last scenario, there are several pros and cons. Let’s explore the role of an analyst, then review a few essential questions you should ask your financial analyst before hiring them.
The Role of a Financial Analyst
A financial analyst is also often referred to as a financial advisor when they’re working with an individual or family. Their main role is to provide expert financial guidance to an individual or a company. Financial analysts often commonly work for banks, investment firms, insurance companies, and companies of all sizes as well as married or single adults. Financial analysts often study business in college, or a related field such as finance, economics or statistics.
Examples of some of the financial decisions that an analyst weighs in on include investment opportunities, mortgages, school expenses such as college tuition, personal taxes, and retirement considerations.
Before hiring a financial analyst, it’s imperative to do your research. Consider this: you thoroughly vet certain professionals you employ for important jobs. For example, you may get several recommendations from friends and do research online before you hire a contractor for your home improvements. Why? Because if you hire the wrong person, it could be a very costly mistake.
The same logic applies to hiring a financial analyst. It’s key to thoroughly research your analyst before you hand over your life’s savings for them to offer their opinion on. At the end of the day, not all analysts are created equal.
Questions to Ask Your New Financial Analyst
Explore several questions to ask your financial advisor before hiring them. Begin by reviewing the list below, and then adding more specific questions that pertain directly to your unique financial situation.
For example, if you’re about to invest in a rental property out of state, I would ask your advisor if they’re familiar with that process. If not, be sure they’re confident in guiding you through that financial decision.
What Is Your Professional Background?
Don’t be afraid to inquire about your financial analyst’s background. Again, you’re relying on them to properly analyze your current financial situation and potentially advise on large investments. You have every right to know things such as:
- How many clients they’ve previously worked with and in what capacity.
- What the largest amount of personal income they have managed is, to date.
- Where they went to college and what they majored in.
Asking some of these questions can help give insight into the analyst’s professional experience and shed light on whether or not they’re a good fit for your financial situation.
What Do They Charge for Their Services?
Although this may seem like an obvious question, it’s important to ask the right question when it comes to payment for their services. There are often many factors in terms of a financial analyst’s compensation. Whether or not you decide to work with a financial analyst may depend on your budget and if you agree with what they charge.
Typically, these analysts charge in a variety of ways, which commonly include:
- Total time spent
- Fixed rate for a specific type of service
- Commission-based structure
- Combination of a few of the above factors.
To avoid getting hit with unexpected fees and charges, it’s important to clearly understand exactly how your financial analyst plans to charge you. Then, see if this pricing structure works for your budget.
For example, if the analyst charges for their time, ask them for a rough estimate of how many hours they think working with you will require. If they work on commissions, ask for more details on their specific commission structure, including how often they require payment.
What Is Their Investment Philosophy?
With financial planning, it’s important that you hire a professional whose philosophy is similar to yours. You’re going to be relying on this person to guide your major purchases and point you in the right direction for stocks and other potentially large decisions, which means it’s imperative that you’re on the same page.
Consider asking your financial advisor some of the following questions:
- What is your perspective in terms of investments; do you think it’s better to play it safe or seek out potential opportunities that are riskier?
- What is your philosophy about managing your own money?
- Would you consider your financial management style to be conservative or aggressive? In what ways?
It’s important to feel completely comfortable with the financial analyst that you hire. Also make sure you and your partner are on the same page in terms of what you’re looking for in financial advice.
Do you want someone whose job is primarily to make you money? If so, consider an expert in frequently scouting and trading stocks. If you’re looking for someone to help you maintain your current financial situation, their approach may be completely different than someone who focuses solely on stock analysis.
Should You Listen to a Financial Analyst?
Ultimately, whether you chose to listen to a financial analyst depends on your personal preference. Consider your short-term and long-term financial goals, as well as your budget to start. Then, thoroughly research which expert would be the best fit for your specific needs. It’s vital that you have a similar financial philosophy as your analyst, as you’ll be relying on their advice for major decisions.
Learn more about financial management and planning today through our extensive online resources.