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How To Choose a Financial Advisor

Financial planning can seem a bit overwhelming to the average person, no matter what stage in life you are at. Planning in the present though is essential for the future you desire. However, not everyone has the background to make crucial financial decisions that could make or break your end goals. 

Anyone wondering what the next steps to achieving set goals should consider a financial advisor. Financial advisors can guide you with a tailored plan that suits your needs, the question is how to find the right financial advisor for you?  

How To Find a Financial Advisor

Before you get started, consider the following methods below to find the right advisor for you.

Employer Recommended Financial Advisors 

Often an employer will have resources available or recommended companies that they advise you to consider when choosing a financial advisor. Larger companies like Google, Apple, Amazon, etc. often have a recommended investment firm or set of approved advisors to work with. 

What To Ask Your Employer:

  • Are there any resources available in our internal portal?
  • Can I set a meeting with HR to discuss my financial plan?
  • Does the company provide recommendations for external advisors?

Friends and Family Recommendations

Statistics have shown that consumers trust recommendations from people they know. It’s possible your friends or family have had a great experience with someone in the financial advisor field. Chances are that these great experiences will be shared with you via a recommendation on a particular advisor. This could be a benefit to both parties via sign-up bonuses or perhaps waived fees based on the institution used.

Finding a Financial Advisor Locally

You may have driven past a local advisors office or had some advisors with 5 star google reviews in your search history. This is a great way to get some exposure to the best rated advisors in your area. 

The next step after conducting your research is to compare and contrast the reviews of those that seem like potential good fits for you personally. Choosing a financial advisor could be as simple as calling to set up an appointment at that point.

Things to Consider When Hiring a Financial Advisor 

In this section, explain some attributes to consider in your own financial journey. Add attributes in a bulleted list. 

Are you looking for a fully managed account? If you’re looking for a fully managed account, you may want to consider a ROBO advisor which automatically does this for you. Here are a few options:

Would you prefer in person visits or virtual meetings? If you prefer to handle your financial discussions face to face, perhaps an in person visit is appropriate for you. Another option may be a virtual meeting if the situation calls for it, or you are more comfortable with that route.   

Where are you at in your current finances? You should consider the following items when assessing your personal financial situation:

Just getting started. Are you just getting started? Towards the end of your career? Are you somewhere in the middle of your career and trying to play catch up? Regardless of your life or financial situation, there are things that an advisor could help you handle. 

Would you like an advisor to provide advice, handle your day-to-day planning, manage your investments (individual stocks, 401K, IRAs, etc.) or a combination of some sort? 

Does your career have weight in your financial planning? Your career may ultimately necessitate financial planning. If you find yourself as a Business owner, an athlete, entrepreneur, etc. you may be more in need of sound financial advice as soon as possible.  

10 Questions to Ask a Financial Advisor

When you set up a meeting with a financial advisor, you should be treating this as an interview. You want to make sure that you are comfortable with each other and that your goals are aligned. A way to accomplish a level of confidence is by asking the right questions. Here are the 10 questions that you should be ready to ask a financial advisor in your first meeting: 

1. Where Did You Obtain Your Finance Degree? 

A financial advisor must have at least a bachelor’s degree in finance to legally operate as an advisor. This ensures your potential financial advisor is able to complete and submit the proper paperwork when completing tasks like estate planning, taxes, and more. 

2. Do You Have Any Specialization Certifications?

Some advisors may take courses in their employment to specialize in certain areas of financial advice. Whether you are dealing with a CPA, CPFA, CFP, RIA, etc. be sure to choose an advisor that continues their education. 

3. What Is Your Investment Philosophy?

With financial advisors, it is critical that you understand their basic philosophy or strategy so that you can make an informed decision if you wish to proceed. 

Some important considerations for identifying their investment strategy and if it aligns to your goals will include:

  • How will they make investment decisions in your account? 
  • Will they be investing in mutual funds, index funds, individual stocks, etc.? 
  • Are they aggressive or conservative with their choices?
  • Make sure to choose an advisor that aligns with your philosophy. 

4. What Are Your Investment Benchmarks?

Some advisors may present their goals as beating the Standard & Poor’s 500 (S&P 500) or Dow Jones Industrial Average (DJIA). The benchmarks should be relevant to your direct investments. 

If you are investing in different indices, or particular stocks, this may be an apples to oranges comparison. Be sure to check with your advisor what their benchmarks are compared to their strategy.   

5. What Other Services Do You Provide?

You may find yourself having other questions besides general financial planning or asset management. Many financial advisors provide other services such as budgeting, college planning, taxes, insurance, etc. Find out if your financial advisor participates in these other helpful activities as well.

6. How Do You Get Paid?

Financial advisors use many different fee structures. It is a good idea to understand how they set up their fees ahead of time. Is it charged via a flat fee, an hourly fee, or a percentage of assets that they are managing? 

7. How Will You Handle Our Relationship?

Discussing with your advisor is a smart first step to understand your future associated cost.  

It is important to know how communication will be handled between the advisor and client. How often will we meet? Will I get regular emails, phone calls or face to face meetings? Most advisors have a regular cadence that they interface with clients, whether it be quarterly, annually, or something in between. If you align early on your communication expectations, you and your financial advisor will work more efficiently together.  

8. Are You a Fiduciary?

While the fiduciary relationship doesn’t fully protect you from loss or harm, a fiduciary advisor is legally obligated to act in your best interest. Non-fiduciary investment advisors are not obligated to act in your best interest and may recommend/choose investments that pay them the most. It is best to know this distinction prior to diving in and investing with any particular advisor. 

9. Are There Any Tax Implications If I Invest With You?

This is a good question to keep the advisor mindful of the tax impact of any investment decision. It is important to know if there are ways to minimize taxes or fees, so that your net return could potentially be higher. Be sure to request the tax information so that the advisor always thinks about taxes when making important decisions.  

10. Do You Have Any Minimum Investment Requirements?

Some advising firms require a minimum investment in order to proceed with the relationship. Ensure that you meet those minimum requirements up front so that you can begin your investment relationship.   

Deciding If a Financial Advisor Is Right For You

Once you’ve gone through the process of finding an advisor and our checklist of questions, consider the pros and cons of actually hiring someone to manage your money. 

Pros of Hiring a Financial Advisor

A certified financial advisor can help you with many of your financial goals. Some of the main pros of hiring an advisor are:

  • Helping you plan for the future with well informed and sound advice
  • Creating strategies that will help you build long term wealth
  • Saving time managing your own personal portfolio
  • Avoiding emotional investing
  • Peace of mind   

Cons of Hiring a Financial Advisor

Hiring a financial advisor does come coupled with a few pain points as well. Some of the main cons of hiring an advisor are:

  • May be difficult initially to find the right advisor for you
  • Cost or fees associated with financial advisors
  • You run the risk of hiring a financial advisor with conflicts of interest

What’s Next: Hiring a Financial Advisor or DIY Financial Planning

What do you do next? Do you seek out an experienced financial advisor, or do you take a more DIY approach to financial planning. The answer should lie somewhere in between. The reality is that a financial advisor can prove to be an excellent tool to realize financial freedom. Financial advisors should definitely be considered if long term guidance is needed. 

In addition, if you do not have your present finances organized, you may not be able to achieve your goals. Dedicating time each day, week, or month — whichever cadence you choose — is necessary to healthy and sustainable financial planning. It is recommended to use a budgeting tool for easy tracking of income and expenses.