Top 6 Mistakes People Make Choosing a Financial Advisor
By The Money Manual Hiring a financial advisor is a clear path to a brighter financial future. Never seeking professional advice – or making bad decisions about who to take advice from – could have negative repercussions for years to come.
According to a 2022 study by Northwestern Mutual, 71% of Americans said improvements were needed in their financial planning, with only 21% working with a financial advisor.*
Unfortunately, many of the 21% of Americans sensible enough to seek professional advice make bad decisions. Those who get it right maximize their future nest-egg, with some studies suggesting around 15% more money to spend in retirement.
Here are some of the basic mistakes people make.
Hiring a Non-Fiduciary Financial Advisor
A fiduciary financial advisor must act first and foremost in their client’s best interests. They are held to strict standards of practice in this regard, compelled to present all relevant facts to the client and to declare any conflicts of interest.
If you are looking to receive financial advice, or currently working with a non-fiduciary financial advisor, you should learn more about your options as soon as possible.
Choosing the First Financial Advisor Found
Hiring a financial advisor is a big step, not an item on a list of things to do. However convenient a quick solution may seem, always weigh it against the reality of your future financial wellbeing. It’s serious, so think about long-term results rather than short-term convenience.
That doesn’t mean the experience has to be a headache. If you’re in the right place, finding the best fiduciary financial advisor for you can happen in a few easy steps.
Selecting a Mismatched Financial Advisor
There’s a difference between a good financial advisor and a financial advisor who is also good for you. You are living a unique situation with specific needs and goals. Finding a fiduciary financial advisor whose strategy aligns with yours is a key step in building a solid financial future.
Questions concerning investment risk tolerance, aggressive stock investments or secure bonds are items you need to fully understand, as well as feeling secure that your financial advisor is helping you make the best choices for you.
Not Checking Credentials
Anybody can talk a big game and sound impressive, so keep in mind that your financial future is not a game and talk is cheap. Any financial advisor worth their salt will be proud to answer questions about their credentials and to provide you with evidence of them.
You should ask about licenses and certifications, including tests such as the Series 66/65 and Series 7. What you’re looking for ideally is a Certified Financial Planner (CFP).
Failing to Fuss over Fees
The fees you are charged for services are key to your partnership with a financial advisor. They come in many shapes and sizes. We all know the term “hidden fees,” but anything not clearly understood might as well be hidden anyway.
You could hear phrases like “flat rate,” “percentage of assets” or “commissions” – each with very different meanings and even implications. Happily, any good financial advisor would respect you for asking the right questions.
Hiring a Non-Vetted Financial Advisor
Finding a financial advisor is easy wherever you are. Ensuring you’re partnering with a vetted fiduciary financial advisor, fully qualified, and right for you is something else.
Money Pickle connects people like you with vetted, third-party financial advisors based on your needs. And they do it in three simple steps.
- Take the free retirement quiz
- Schedule a free video meeting
- Get matched to a financial advisor
Money Pickle doesn’t charge for its service. And you’ll be able to chat with vetted advisors to find the best match for your personal needs.
Take the MoneyPickle Retirement Quiz
Take Your Online Assessment in Seconds
- Answer some basic questions
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