Make Your Money Go Further: Avoid These 3 Mistakes When Picking a Financial Advisor

Caitlyn Knuth
August 28, 2022

Managing money successfully isn’t an easy task. When you could use a little help, hiring a financial advisor is typically a good way to go. It’s a decision that can make the entire process of managing much less stressful—not to mention more profitable in the long run.

Many people working with financial advisors find they can offer a great deal of clarity around how money fluctuates and grows over time. Ultimately, understanding the investment options available can also lead to peace of mind about your financial future.

That said, it’s important to take time to find the right financial advisor to work with. Not every financial advisor is alike, and it’s vital to find a professional who aligns with your goals and lifestyle. The following are 3 mistakes to try and avoid when selecting the financial advisor you’re going to be working alongside.

1.Don’t Go with the First Person You Find

When you’re going through the process of picking a financial advisor, a little patience goes a long way. Picking the first person you find online is typically a mistake you’ll want to avoid.

Oftentimes, clients pick a financial advisor on a whim when they’re afraid of the stress an extensive search might entail. Unfortunately, going with a first recommendation or search engine click can lead you to a financial advisor who simply isn’t on the same page when it comes to what you need.

There are all types of reasons people turn to financial advisors for help. These include debt management, investment insight, tax planning, education funding, insurance coverage, and even estate planning just to name a few. A financial advisor’s role is comprehensive, but many financial advisors also specialize in certain areas of financial management. If your needs and their expertise don’t align, it could be an unsuccessful partnership from the start. Taking time to research your options when it comes to picking a financial advisor that understands your goals is never a waste of time.

2. Don’t Sign on Without Understanding the Fee Structure

Once you’ve found a financial advisor who seems to fit your financial goals and needs, it’s important to look closely at their proposed fee structure. Having someone to help you manage your finances is wonderful, but if the cost of fees is going to diminish your overall long-term profits, it may not be worth the investment at all.

Different financial advisors take drastically different approaches to fees. While some take a percentage of the assets they manage, others earn commission on financial products they provide. It’s common to find that financial advisors utilize a fee-only approach where a flat rate is charged to a client no matter what the product usage may be. Understanding what fee structure your financial advisor uses is vital to the overall health of your finances.

 3. Don’t Avoid Asking About Credentials

It’s not always easy to ask someone to prove their experience. Many people fear and avoid awkward topics of this type. However, when it comes to picking a qualified financial advisor—it’s a must.

You want to know with certainty that the action you take based on financial advice is sound and backed by experience. Asking about your financial advisor’s credentials isn’t aggressive, it’s simply smart business. Some of the most common tests qualified financial advisors need to take are Series 66, Series 65, and Series 7. It’s important to recognize that those who have earned the title of Certified Financial Planner (CFP) have taken their training a step further.

You’ll also want to look at whether the professional you’re hoping to partner with is a fiduciary financial advisor. Professionals of this type are held to a strict fiduciary standard that promotes working in the best interest of the client at all times. If you’re working with a non-fiduciary advisor, there’s a risk that they may not have to disclose any potential conflicts of interest to you along the way.

It’s Worth it to Look at the Details That Matter

Working with a financial advisor to make your money go further is a smart move. Taking time to investigate the details that matter when picking your advisor is just as important. Don’t be afraid to ask the right questions when it comes to your financial future. If your advisor is a true professional with your best interests at heart, they’ll be more than willing to answer!

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