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SmartAsset is a personal finance technology company that features a financial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe of Financial Advisors.
*Northwestern Mutual study
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 whowork with a financial advisorreport “substantially greater financial security, confidence and clarity than those who go it alone.”
The value ofworking with a financial advisorvaries 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.
SmartAsset’s new toolmakes it easy to find the right financial advisor near you in just a few minutes. Our exclusive, no-cost tool matches you with up to three local fiduciary financial advisors that have passed a rigorous screening process. We confirm each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.
Being aware of these seven common blunders whenchoosing an advisorcan help you find peace of mind, and avoid years of stress.
1. Hiring an Advisor Who Is Not a Fiduciary
By definition, 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.
All of the financial advisors on SmartAsset’s matching platform are registered fiduciaries. If your advisor is not a fiduciary and constantly pushes investment products on you,use this no-cost tool to find an advisorwho has your best interest in mind.
2. Hiring the First Advisor You Meet
While it’s tempting to hire the advisor closest to home or the first advisor in the yellow pages, this decision requires more time. Take the time to interview at least a few advisors before picking the best match for you.
3. Choosing an Advisor with the Wrong Specialty
Some financial advisorsspecialize in retirement planning, while others are best for business owners or those with a high net worth. Some might be best for young professionals starting a family. Be sure to understand an advisor’s strengths and weaknesses - before signing the dotted line.
4. Picking an Advisor with an Incompatible Strategy
Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.
5. Not Asking about Credentials
To give investment advice,financial advisorsare required to pass a test. Ask your advisor about their licenses, tests, and credentials. Financial advisors tests include the Series 7, and Series 66 or Series 65. Some advisors go a step further and become a Certified Financial Planner, or CFP.
6. Not Understanding How They are Paid
Some advisors are "fee only" and charge you a flat rate no matter what. 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 them.
7. Trying to Hire an Advisor on Your Own
Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.
Our no-cost tool makes it easy tofind the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.
Follow These Steps to Get Matched With the Right Advisor for You
1. Simply enter your ZIP code below.
2. After you enter your ZIP code and answer questions about your financial goals, you can compare up to three advisors local to you and decide which to work with.
3. Enjoy a better financial future!
FAQs
Lack of perceived need. Many consumers share the perception that they simply don't need a financial planner. They may receive financial advice from a family member or friend; in some cases, they feel they've already achieved their goals and thus don't require advice.
Why don t people hire financial advisors? ›
Lack of perceived need. Many consumers share the perception that they simply don't need a financial planner. They may receive financial advice from a family member or friend; in some cases, they feel they've already achieved their goals and thus don't require advice.
What is the best question you can ask of a financial advisor? ›
In your initial meeting, ask questions about the types of services they provide, their investment philosophy, how much they charge, whether they have a fiduciary duty, what investment benchmarks they use, whether they offer robo-advisor services or access to new technologies, what custodian they use, whether you can ...
What do financial advisors struggle with most? ›
Financial advisors are most concerned about business development. Nearly 80% cite the challenge of finding “ideal” clients (Exhibit 1). While an “ideal” client will vary among financial advisors, sourcing them instead of less preferred clients is a big deal.
What is a red flag for a financial advisor? ›
On the other hand, fee-based or commission-based compensation structures can both be financial advisor red flags. These advisors may earn part or all of their compensation in sales commissions. In other words, they may be more incentivized to sell products than give advice.
What is unprofessional behavior for a financial advisor? ›
Unethical financial advisors usually have warning signals including inconsistent reporting to clients, product pushing, and guaranteeing future results. Ethical financial advisors prioritize learning about your personal history, explaining unfamiliar financial matters, and planning for their succession in they retire.
Who is the most trustworthy financial advisor? ›
The Bankrate promise
- Top financial advisor firms.
- Vanguard.
- Charles Schwab.
- Fidelity Investments.
- Facet.
- J.P. Morgan Private Client Advisor.
- Edward Jones.
- Alternative option: Robo-advisors.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
What is the downside of using a fiduciary? ›
A disadvantage of a fiduciary is that fiduciary advisors are often more expensive than non-fiduciary advisors as they charge higher market rates.
How do you know if your financial advisor is doing a good job? ›
Here are five steps you can take to gauge your financial advisor's performance:
- Step 1: Evaluate the performance of your investment portfolio. ...
- Step 2: See if the financial advisor conducts an annual tax review. ...
- Step 3: Check if the advisor is aligned to your risk appetite. ...
- Step 4: Ensure your financial advisor listens.
Here are four traits you want to look for when gauging whether a Financial Advisor is suitable for you:
- They work with you. ...
- They take a holistic view of your finances. ...
- They develop and customize your investment strategy. ...
- They have the support of an investment team. ...
- There is a lack of transparency.
Fiduciaries are obligated to act in your best interest, whereas the title “financial advisor” implies no legal obligation. When looking for a financial advisor to help you develop your custom financial plan, you should ensure that your financial advisor is a fiduciary.
Why do people leave their financial advisor? ›
As a financial advisor, it takes hard work to attract clients and even more work to keep them. Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.
How to politely decline a financial advisor? ›
Here's how we turn down a financial advisor politely in such a circ*mstance:
- Make him understand your deteriorating financial condition.
- State your reluctance of taking any market risks.
- Express your difference of opinion with him.
- State how you love to be independent.
Pressure To Meet (Unrealistic) Targets And Burnout
While most advisors want to believe that they are doing this job because they love it, there are times when they feel forced into the situation and cannot get out of it. It is especially true for those with bosses who are always breathing down their necks.
Is there confidentiality with financial advisors? ›
The CFA standard of professional conduct policy requires CFAs to keep information about current, former and prospective clients confidential unless it concerns illegal activities, or the disclosure is required by law, or the client or prospective client permits the disclosure of the information.
How do I know if my financial advisor is honest? ›
An advisor who believes in having a long-term relationship with you—and not merely a series of commission-generating transactions—can be considered trustworthy. Ask for referrals and then run a background check on the advisors that you narrow down such as from FINRA's free BrokerCheck service.
What a financial advisor will tell you? ›
The advisor will provide holistic planning and assistance to help you achieve financial goals. You'll have in-depth conversations about your finances, short- and long-term goals, existing investments and tolerance for investing risk, among other topics.
