6 Things to Think About When Choosing a Financial Advisor

Hiring a financial advisor is one of those watershed moments in life, a fork in the road that may shape your financial future for decades. According to a Northwestern Mutual study of American individuals’ views and practices toward money, 71% believed their financial planning might improve, but only 29% interacted with a financial counselor.

Research suggests that those working with a financial advisor feel better at peace about their finances and may have 15% more money to spend in retirement.

Individuals value working with a financial advisor differently, and advisors are legally prohibited from promising returns. However, research shows that those who work with a financial advisor feel more confident about their finances and may have 15% more money for retirement.

While employing a financial adviser might help you optimize your retirement nest egg, there are a few possible hazards to be aware of when deciding who to hire.

Over 25 years, assuming 5% annualized growth on a $500k account and 8% annualized growth on an advisor-managed portfolio. The value of professional investment advice is simply an example and varies according to each client’s specific circumstances and portfolio composition. Before selecting an investment adviser, carefully analyze your investment objectives and risk variables, and complete your own research.

Here are six things to consider when hiring a financial advisor.

1. Do Not Work with a Non-Fiduciary Financial Advisor.

The standard of care for a fiduciary financial advisor is high. That commitment is strong, implying that they must always operate in their customers’ best interests, prevent conflicts of interest, disclose any possible conflicts of interest, and offer all relevant data to their clients.

2. Do not hire the first financial advisor you come across.

Resist the urge to check “hire a financial advisor” off your to-do list as soon as possible. At the same time, it may be easier to choose an adviser near your home or family; a choice as important as your future finances demands more than a superficial examination.

3. Do not collaborate with an advisor whose strategy does not align with yours.

Your total risk tolerance is a personal decision that differs greatly among financial counselors. Some people prefer riskier stock investments, while others choose more stable bonds. Look for a financial advisor whose risk tolerance is similar to or willing to match yours.

4. Remember to Inquire About Credentials

A lot of advice is available for free in life. This is not financial advice, and financial advice can have far-reaching implications. As a result, inquire about your possible future advisor’s exams, licenses, and qualifications. Financial advisers must pass the Series 7, Series 66, or Series 65 exams. Some counselors go the extra mile and become Certified Financial Planners or CFPs.

5. Avoid Misunderstanding Advisor Fees 

High fees might reduce your returns and impact your entire nest investment. However, the methods used to collect fees differ. Some are “fee-only,” meaning they charge a set sum regardless of usage. Others charge a percentage of all assets managed. Some get direct commissions from mutual funds or other financial products, creating a substantial conflict of interest.

6. Do not choose an advisor who has not been thoroughly vetted.

There are probably numerous extremely skilled financial advisors in your area. However, selecting one might be difficult. After all, not all financial advisors are created equal, and given the important role they can play in assisting you in attempting to achieve your financial goals, this is a decision you want to get right. It is worthwhile to compare and research advisors to find the right one for you, with whom you will want to work for many years.