Working with a financial advisor to help you come up with a plan to reach your financial goals is always a good idea, and can definitely make a big difference in your financial life. Indeed, a financial advisor can help you identify short and/or long term goals.
They can put strategies in place to help you achieve them. For many people, because investing and finances can be intimidating, it makes perfect sense for them to consult with a financial advisor.
However, some people make mistakes before consulting with a financial advisor. One of them is that they fail to check the person out to make sure that the financial advisor is truly licensed to give them that financial advice they want.
So if you’re thinking of hiring a financial advisor soon to better manage your money, avoid these five common mistakes.
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1. Failure to do a background check.
The most common and prevalent mistake people make before consulting with a financial advisor is that they fail to check them out to make sure they are truly licensed to give financial advice. That is a big mistake.
Once you are matched up with a financial advisor, the very next next thing you need to do is to check their qualification, history, and current employment. You can do this by going online to check their qualifications.
If the advisor does not have the proper licence or qualifications, then you might not want to deal with him or her.
Have you identified your financial needs? Then find a financial advisor who offers the services you are looking for.
2. Not Knowing the kind of advice they want.
Before you meet with a financial advisor, whether by phone, online, or face-to-face, it’s important you know what kind of advice you want and what you really want to get out of it. Doing so will make the initial discussions easier, and time is not wasted on figuring out your financial goals. Rather, you should know your goals beforehand. and the financial advisor would then prioritize your financial goals and come up with strategies on how to achieve them.
To find your independent advisor in your area, check out this free financial advisor matching tool.
3. Not knowing if the financial advisor is qualified and experienced.
Knowing that they’re licensed is one thing, but whether they are qualified and experienced to give you the right financial advice is another thing. Being licensed, qualified and experienced are equally important. Therefore, you have to make sure that they have the right qualification and experience to meet your needs. That includes their educational background. Do they have advanced degrees in finance, economics, accounting, financial planning, etc?
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Equally important is their work experience. How long have they been giving financial advice? This is important. If you are looking for complex financial advice, you would want to deal with a financial advisor who have advised on these issues for a long period of time.
How many clients do they have? Do they help clients with similar issues as yours? It’s important for you to determine if they provide advice on your particular issue. For example, if you want advice on retirement planning, and they only focus on college education planning, he or she might not be the right financial advisor for you.
4. Not being clear about the financial advisor’s fees.
Another mistake you want to avoid is to not being clear on the fees.
You should inquire about their fees for their service (how they’re paid), or at the very least a rough estimate of their fee to get an idea of what you will be paying. So ask for a breakdown of the costs. That should include an estimate of the fees for 1) preparing the advice, 2) implementing the advice, and 3) the continuous monitoring and advice. So asking these questions is very important, because fees and commissions they receive may depend on the type and complexity of the advice you’re seeking.
5. Making a decision after meeting only one financial advisor.
Another common mistake people make when hiring a financial advisor is meeting with only one advisor. You want to make sure that you meet with at least two financial advisorsbefore you decide who to stick with. Again, this is a good opportunity to not only to pick the most qualified and the best financial advisor for your needs, but also to compare their costs and fees.
This free financial advisor matching tool will connect you with up to three financial advisors in your area.
In sum, the right kind of financial advice can really make a difference in your financial planning. However, make sure you avoid making these mistakes when thinking about hiring a financial advisor.
- Find Out Now 7 Questions People Forget to Ask Their Financial Advisors
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- Compare Fiduciary Financial Advisors — Start Here for Free.
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Overwhelmed? You Have Options
You might feel overwhelmed with your finances, but you have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.
6 Replies to “5 Mistakes People Make When Hiring A Financial Advisor”
Having worked for a large broker for a number of years I can honestly say… #1 Failure to do a background check and #3 Not knowing if the financial advisor is qualified and experienced are two of the biggest things many people overlook when hiring a financial advisor.
It is not uncommon for people to hire an advisor based off of a referral from a friend or neighbor. Just because your neighbor thinks “XYZ” financial advisor is nice and trustworthy does not make it true.
People also don’t realize how simple it really can be for someone to get the title of “Financial Advisor”. It doesn’t make someone a financial genius. However, the title can make many salespeople a lot of money.
Thanks, Eric, for stopping by.
I totally agree with you. Anyone can have the title “financial advisor.” But are they experienced enough? Do they have the right qualifications?
Who are you dealing with? Has their license been suspended or revoked?
These are some of the things that people looking to hire a financial advisor need to consider.