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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
People skip financial advisors for a few reasons: Cost: Fees can add up, and some think it's not worth it. DIY mindset: Many feel confident managing their own money. Misunderstanding: Fees might seem higher than they are.
What financial advisors don t tell you? ›
10 Things Your Financial Advisor Should Not Tell You
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
People skip financial advisors for a few reasons: Cost: Fees can add up, and some think it's not worth it. DIY mindset: Many feel confident managing their own money. Misunderstanding: Fees might seem higher than they are.
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 ...
Why do so many financial advisors fail? ›
Poor Prospecting Strategies
And this is where many advisors get it wrong. They spend too many resources on strategies like cold calling and buying a lead list, and they try every new tool that comes along — but they never actually get it. They keep doing this until they end up frustrated and quit.
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.
At what net worth should I get a financial advisor? ›
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.
What percentage of millionaires use a financial advisor? ›
The study reveals that 70% of millionaires work with a financial advisor, compared to just 37% of the general population. Moreover, over half (53%) of wealthy individuals consider their financial advisors their most trusted source of financial advice.
Let me walk you through the biggest red flags to look out for in an advisor:
- They Try and Time the Market. ...
- They Never Challenge You. ...
- You Never Hear from Them. ...
- They Use Jargon that You Don't Understand. ...
- They Push Products. ...
- They Don't Do Anything Besides Invest Your Money. ...
- They Recommend Individual Stocks.
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.
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.
Hiring a financial advisor can seem like an unnecessary expense but they often save you money in the long run. If you choose to hire a financial advisor, make sure all their fees are transparent before you sign. A financial advisor is usually recommended when their fee is less than what they save for you.
Are financial advisors worth 1%? ›
If you're getting a return that you feel is worth the fee then you may not be paying too much. While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want then it's not overpaying, so to speak.
Do financial advisors have a bad reputation? ›
Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?
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.
