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5 Insider Tips for Choosing a Financial Advisor

By U.S. News & World Report

Not everyone is a do-it-yourself investor. Some people do not have time to manage their assets; others do not want to, or feel they are not equipped with enough information to do it properly. A financial advisor or investment management service is often a natural next step.

Finding one, however, can be a daunting task. This person — or service, if you are considering a robo-advisor — will take charge of your investments and play a lead role in your financial future. How do you find the right fit for your needs?

Terry Banet is the chief investment officer at SigFig, an investment management firm in San Francisco. Her job includes making investment decisions for clients on a daily basis. How an investment professional goes about choosing the person or service to manage their own investments could serve as a useful guide for investors who are just starting out. Even if you feel you are not a beginner when it comes to investing, following the steps below might prove useful in figuring out your needs — and help you find the professional or service that would best address them.

1. Understand your actual needs. First things first: What kind of advice do you want? Do you just want someone who will manage your investments, or do you want advice on how to structure your entire financial plan? If you want help deciding whether a 529 account is the best way to save for your kids’ college education, or how much life insurance you need, or how to draw up a will that provides for your family’s future, you might be better off spending your money on a good lawyer and choosing low-cost index funds on your own, or going with a low-cost, automated system that will choose those index funds for you.

2. Shop around. Whether you are looking for an individual or an automated system, explore a few options before making a commitment. A lot of people choose an advisor based on a referral. Certainly, a friend’s recommendation is a good sign, but you should not set aside your own judgment. The first person you meet, or the first system you try, might seem great — but the second or third might be even better. Especially if you are new to investing, you should check out a couple of different options so you can compare approaches.

3. Think about risk. Take some time to think through your tolerance for risk on your own. Risk is a complicated, abstract concept, so try thinking about what would keep you up at night. For example, would it bother you if the markets are shaky over the next year, and a year from now, your account is down 5 percent? What if two years pass, and your account is still down 5 percent? Five years from now, if your account is flat, will you be upset?

Look around online for questionnaires that are designed to test your risk tolerance. Take a few of them so you get a feel for the typical allocation your answers suggest. That way, if you get an off-the-wall suggestion, you will recognize it as such. You are not necessarily looking for the same cookie-cutter answer as the allocation you would get anywhere else, but you do want to know an outlier when you see one.

4. Do not be seduced by big numbers. The standard boilerplate language on investment-company advertisements says, “Past performance is no guarantee of future results.” It is legalese, but it is also true. Beating the market is nearly impossible to do consistently. Do not look for the system with the best five-year returns; look for a system you can understand and that you feel comfortable with. If you are looking for an individual advisor, you want someone you can speak openly with and who can explain things in a way that makes sense to you.

One key question to ask any advisor is how tactical or strategic they are. Being “strategic” tends to mean choosing an allocation and sticking with it over the long term. When advisors make “tactical” bets, they move in and out of investments based on their view of what is happening in the market from week to week. Keep in mind that timing the market is very difficult, and research shows that most active managers do not outperform enough to justify their higher fees.

5. Keep an eye on the small numbers because they add up. Fees are one area most individual investors do not pay enough attention to — and that goes beyond the advisor or advisory service’s fee. You need to know how much the advisor or the company takes cost into account when choosing investment products for you. Do they earn commission on anything they might sell you? What kinds of fees would they consider expensive? You cannot control the market, but you can control the fees you pay to access it. Keeping those costs low is the best thing you can do to protect and grow your money.

You do not have to be an investing professional to choose a good advisor. You just have to be prepared, think about what you want and make sure you understand how anyone you are working with is making their money. The investing world has its own language, and it can be intimidating if you are new to it, but the core questions you are considering are pretty simple: What am I saving for, and what kind of help do I need to get there? Let the essentials guide you, and you will be fine.

More from U.S. News

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5 Insider Tips for Choosing 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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