How To Choose a Financial Advisor

The current cost of living is a concern for most Americans. As such, having a plan in place for your future is important. With as many as 88% of Americans currently struggling to save any money at all, a financial advisor can help you put a budget and plan in place, depending on your concerns. A professional advisor may be a great resource if you need to pay off credit card or medical debt or figure out how to budget for student loan payments.

What Does a Financial Advisor Do?

A financial advisor is a professional who provides guidance and advice to individuals or organizations on various financial matters. Their primary role is to help clients make informed decisions regarding their money, investments, and overall economic well-being. 

How To Choose a Financial Advisor

Finding someone who is the right fit for your needs requires you to do a little bit of research and pre-planning before you pick a financial advisor.

Determine your financial needs

Clarify your financial goals and the specific areas in which you require assistance. Do you need help with retirement planning, investment management, estate planning, or a comprehensive financial plan? Understanding your needs will help you identify advisors with the appropriate expertise.

Seek recommendations from colleagues

Ask for recommendations from friends, family members, or colleagues who have had positive experiences with financial advisors and are in similar financial situations. Personal referrals can be a valuable starting point in finding trustworthy professionals.

Research credentials and designations

Look for financial advisors who hold relevant credentials and designations. Some common ones include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), and Certified Investment Management Analyst (CIMA). These certifications indicate that the advisor has met specific education, experience, and ethics standards.

Check regulatory compliance

Verify whether the financial advisor or their firm is registered with the appropriate regulatory bodies, such as the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). This helps ensure that they operate within the regulatory framework and adhere to industry standards.

Conduct interviews during consultations

Once you have a list of potential advisors, schedule interviews or initial consultations. This allows you to assess their qualifications, experience, and communication style. Prepare a list of questions related to your specific needs to gauge their expertise and determine if they are a good fit for you.

Evaluate the fee structure 

Understand the fee structure of the financial advisor. Some advisors charge a percentage of assets under management (AUM), while others have hourly or flat fee arrangements. Consider the fee structure in relation to the services provided and your financial situation.

Confirm fiduciary duty

Not all financial advisors are fiduciaries, meaning they are not required to act in the best interest of their clients. We recommend that you look for financial advisors who have a fiduciary duty. This ensures that the advisor will prioritize your needs and goals when providing recommendations.

Request references from current and past clients 

Ask the financial advisor for references from current and past clients. Contact these individuals to gain insights into their experiences and the advisor's ability to deliver on their promises.

Check disciplinary history

Research the financial advisor's background using tools such as BrokerCheck or the SEC's Investment Adviser Public Disclosure (IAPD) database. These resources provide information on any disciplinary actions, complaints, or conflicts of interest involving the advisor.

Are Financial Advisors Worth It?

The value of a financial advisor depends on various factors, including your financial situation, knowledge, time availability, and the complexity of your financial goals. Here are some considerations to help you determine if a financial advisor is worth the money for you:

Expertise and knowledge

Financial advisors have specialized knowledge and expertise in areas such as investment management, tax planning, retirement planning, and estate planning. They stay updated on market trends, regulatory changes, and financial strategies. If you lack the time or knowledge to effectively manage your finances, an advisor can provide valuable insights and help you make informed decisions.

Time savings 

Managing your finances can be time-consuming, especially when it involves researching investments, monitoring market conditions, and staying on top of financial tasks. A financial advisor can handle these tasks on your behalf, saving you time and allowing you to focus on other priorities.

An objective perspective 

Emotions and biases can often influence financial decision-making. A financial advisor can offer an objective perspective and help you make rational choices based on your financial goals and risk tolerance. They can also provide a level-headed approach during market downturns, potentially preventing impulsive decisions that may negatively impact your long-term financial well-being.

Personally-tailored financial planning

Put away the Excel templates and self-help books. Financial advisors can create customized financial plans based on your specific needs, goals, and circumstances. They take into account your risk tolerance, time horizon, income, and other relevant factors. A well-designed plan can help optimize your financial strategies and improve the likelihood of achieving your objectives.

Behavioral coaching 

Behavioral biases, such as fear or greed, can impact investment decisions and potentially harm your financial outcomes. Financial advisors can act as behavioral coaches, guiding you through emotional decisions, reminding you of your long-term goals, and helping you stay disciplined during market fluctuations.

Access to resources 

Established financial advisors often have access to a network of professionals, such as tax specialists, estate planning attorneys, or insurance providers. They can connect you with these experts when needed, enabling you to receive comprehensive financial advice and services.

Accountability and consistent monitoring

A financial advisor can help hold you accountable to your financial goals. They monitor your progress, review your investments regularly, and make adjustments as needed. This ongoing support and guidance can provide peace of mind and keep you on track toward your objectives.

Find a Financial Advisor

Ultimately, the decision of whether a financial advisor is worth the money is subjective and depends on your individual circumstances. Consider your financial needs, preferences, and comfort level with managing your own finances. If you believe that the expertise, time savings, and personalized advice provided by a financial advisor outweigh the costs, it may be a worthwhile investment for you. In that case, you can use the Expertise.com financial advisor directory to find a top-rated professional in your area.