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5 Smart Questions to Ask Before Hiring a Financial Advisor

By U.S. News & World Report

Imagine this: You’re got a good job, and you’re earning a decent wage. All the media hype about saving for the future is finally beginning to sink in. You know you need to invest, and maybe you’ve even started. But let’s be honest — you don’t have a clue about what you’re doing. And you’re not the type of person who wants to go it alone.

You’re ready to hire a financial advisor, but even that decision seems overwhelming. How do you decide which financial advisor to hire, and how do you know if the advisor is good or not?

To get you on the right track in your search for a financial advisor, here are the most important questions to ask before hiring a financial advisor.

1. How are you compensated? Advisors can be compensated in many ways, and the method of compensation is key to understanding whether you are getting what you pay for.

Familiarize yourself with the financial advisory types of compensation, commission, percent of assets under management, fee for service or a combination of those structures.

Many advisors make their fee structure opaque and difficult to unpack. In that situation, walk away and find an advisor with a transparent fee structure. In general, you needn’t pay greater than a 1 percent management fee of your total financial assets.

If you’re looking for a bit of guidance and minimal hand-holding, you may be interested in the newer robo-advisor platforms. For example, Wealthfront and Betterment oversee your investment portfolio with a smart index fund approach for a reasonable 0.15 percent to 0.35 percent fee structure.

2. How have your returns compared with their respective benchmarks? According to Dictionary.com, benchmark is defined as “A standard of excellence, achievement, etc., against which similar things must be measured or judged.”

You’ve probably heard of the Standard & Poor’s 500 index or the Dow Jones industrial average. The S&P 500 is frequently used as a benchmark for the overall U.S. stock market since it includes representation from the 500 most important U.S. companies. The Dow is an old index, founded by The Wall Street Journal editors in 1896 that represents 30 major industrial U.S. companies.

In general, if the advisor’s investment portfolio returns are not matching or surpassing those of their respective benchmarks, you need to find out why.

3. What is your training and your professional designation? Did you know there is no universal standard for financial advisors? In fact, there are over 100 financial advisor designations. You want to make sure you’re hiring a qualified individual to handle your hard-earned money. Some certifications are not worth more than the paper they’re printed on, whereas others require extensive training, years of work experience and comprehensive licensure.

The top three financial advisor certifications are certified financial planner, chartered financial analyst and the newer personal financial specialist, which requires a CPA credential as well. There are other designations which require extensive education, experience and high standards.

In summary, whatever the designation of the financial advisor under consideration, perform your due diligence to determine their education, training and experience level.

4. Are you a fiduciary? Simply put, a fiduciary is held to a code which requires that the assets are managed for your benefit rather than for his or her advantage. While you’d assume that all financial advisors are fiduciaries, it’s not true. In fact, stock or investment brokers, compensated by commission, are generally not fiduciaries.

You want an advisor who puts your needs above his or her own. Make sure your future investment advisor is governed by the fiduciary standard.

5. What are your services and investment strategy? Before starting a conversation with a financial planner, figure out what you are looking for. Then find out whether the advisor’s services match up with your wants and needs.

Are you looking for a full package of services, including investing, tax, estate and other advising services? Or do you need someone to set your investments on track and monitor them a couple of times per year? Maybe you just want a one-time meeting with an advisor for a quick check.

If the advisor has a complex strategy or investing approach, ask for empirical support and documentation that shows the approach has merit. There are reams of research supporting the success of a simple, market-matching, passive, index fund strategy over time. Make certain that any sophisticated and complicated approaches are valid.

Finally, similar to choosing any professional, do your homework first. Choose an advisor who is forthcoming and disclosing. Make sure his or her approach matches yours.

More from U.S. News

Your 7-Step Checklist to Choosing a Financial Advisor

A Smart Investing Plan for 30-Somethings

10 Ways to Build a $1 Million Nest Egg

5 Smart Questions to Ask Before Hiring a Financial Advisor originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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