Choosing a financial advisor is a major life decision that can determine your financial trajectory for years to come.
A 2019 Northwestern Mutual study found that U.S. adults who work with a financial advisor report “substantially greater financial security, confidence and clarity than those who go it alone.”
The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests average additional investment returns can range from 1.5% to 4% more each year.
It’s important to find an advisor who has passed a rigorous screening process, possesses the proper licenses and has no pending or valid regulatory disclosures within the past 10 years.
Choosing an advisor who can help you find peace of mind in the current world chaos will go a long way in avoiding years of stress.
Try these tips to find a financial advisor that’s a good fit for you:
1. Work with an Advisor Who Is a Fiduciary
A fiduciary is an individual who is ethically bound to act in another person’s best interest. This obligation eliminates conflict of interest concerns and makes an advisor’s advice more trustworthy. If your advisor is not a fiduciary or constantly pushes investment products on you, it’s time to look elsewhere.
2. Talk to a few Advisors and Pick the one that Meets Your expectations
Take the time to interview at least two or three advisors before picking the best match for you.
3. Choose an Advisor with the Right Specialty
Some financial advisors specialize in preserving your assets and guaranteeing income in retirement, whether you’re a business owner, someone with a high net worth or a young professional starting a family. Be sure to ask about what an advisor can do for you to fulfill your expectations of financial success.
4. Pick an Advisor with a Compatible Strategy
Each advisor has a unique strategy. Some advisors may suggest aggressive investments. Others only show products that add steady asset growth to your retirement accounts without risking a negative market. If you are a risk taker and prefer to go all in on stocks, an advisor that is knowledgeable about fixed and insured assets is not a great match for your style.
5. Ask about Credentials
Ask your advisor about their licenses, tests, and credentials. A licensed insurance agent is required to complete continuing education and pass a test.
6. Understand How They are Paid
Some advisors are "fee only" and charge you a flat rate no matter how your investments perform. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds, a serious conflict of interest. If the advisor earns more by ignoring your best interests, do not hire him. Insurance agents don’t charge for their services. They get paid by the insurance carrier when you make a purchase of an insurance product.
7. Hire an Advisor that matches your objectives
Examine your investing style and choose an advisor that you feel comfortable with. Make sure the advisor you select has been rigorously screened for regulatory disclosures and license confirmation.
