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7 Steps to Finding the Best Financial Advisor

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infographic checklist 7 Steps to Finding the Best Financial Advisor

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Table of contents:

  1. Know what services you need and be open-minded
  2. Understand how advisors are paid
  3. Find the best culture fit—values matter
  4. Don’t hire the first advisor you meet, even if they were referred to you
  5. Look for a specialty
  6. Distance is no longer an obstacle
  7. Vet the advisors planning philosophy

Hiring a financial advisor can be overwhelming.
Any time you combine money, emotions, and personality it’s bound to be a tricky undertaking and very personal.
We’ve put together a seven-step process to help you be efficient in finding the best match. We hope the tips we have learned over the years lead you to the right advisor and avoid costly and messy breakups.

1. Know what services you need and be open-minded

Based on experience, the job of a good financial advisor is to listen to client objectives, turn things upside down for a time, then help a client implement new, better strategies over time to meet the stated objectives and more. Sometimes you might go in for one thing and come out with something else.
Be open to those twists and turns where the advisory relationship may lead you. There are usually a variety of ways a good advisor can add value to your life.
Know, that it might be more than about money.

2. Understand how advisors are paid

There are basically three ways that advisors are paid. Commissions, fees, or a combination of the two. But, unfortunately, it’s not that simple. For example, if an advisor is paid via fees, they could be hourly, project-based, retainer, or an assets-under-management model. All are valid, it’s just a question of what is right for the individual client. Anytime an advisor crosses over to charging commissions based on products that you purchase, there can be conflicts of interest that emerge. This can become further exacerbated if an advisor can work on commission and charge fees. This is known as a fee-based relationship. And, fee-based is not fee-only. Fee-only advisors work as fiduciaries and must act in your best interests, not in the interests of the company they work for. Fee-only is the highest standard in the industry.

3. Find the best culture fit—values matter

Culture is everything.
As a company, if our values don’t align with those (including clients) we do business with, it’s a deal breaker. We think of the advisory/client relationship in the same way. If all parties are not speaking the same language, the relationship is going to be a struggle. A struggle is the last thing you need to contend with when you are planning your money.
Advisors who work for a large company versus an independent firm can be very different. The company advisor must adhere to a certain set of rules whereas an independent advisor can do business on his/her own terms. Is the advisor a solo planner or is there a team working with you? What matters is aligning yourself with the type of advisor or advisory firm that best aligns with your view of the world.

4. Don’t hire the first advisor you meet, even if they were referred to you

For the reason stated above, you should sit down with several advisors to assess if there is a good culture fit. Look for an advisor who listens, really listens, and doesn’t just do all the talking.
Look for an advisor who asks good probing questions about all facets of your life, not just your money. Look for an advisor who doesn’t just say what you want to hear. Honesty is more important than fluff. Look for an advisor who puts your interests above their own.
And as a side note, just as important as it is for the advisor to ask good questions, so is it for those looking for the right advisor. Go to the first meeting prepared. NAPFA.org offers a list of good questions to ask to get you started.

5. Look for a specialty

Sometimes advisors specialize in working with clients in a particular career field such as doctors, business owners, or federal government workers. Or, sometimes they have a situational specialty such as helping plan for retirement or setting up 401K plans. And, further, some specialize in actively managing money and don’t offer comprehensive financial planning services. You can usually learn a lot by browsing an advisor’s website. Look for those who are clear about what they do and who they enjoy doing it for. You can gain a lot of efficiency in service delivery and potential value by aligning with a firm that offers its services to a consistent group of similar clients.
And, while you are browsing the advisor’s website, look at the disclosure verbiage at the bottom of the front page. If you see references of broker/dealer or “insurance provided by” or FINRA you know you are dealing with a firm that can sell products and there is a potential for conflicts of interest.

6. Distance is no longer an obstacle

New technologies have opened up the world, literally. No longer do you need to be limited to a group of advisors in your town or area. If you can find a good fit advisor in your community, great, especially if face-to-face meetings are important to you. But, if your situation warrants looking more broadly, zoom can work great if it means you are getting the right specialty, fee structure, or culture fit.

7. Vet the advisors planning philosophy

If something seems weird or “off” to you, trust your gut instinct. There is likely some incompatibility in terms of the advisor’s services and your needs. For example, if you like to invest in individual stocks and the advisor offers only mutual funds, the relationship is unlikely to work. Is the advisor a goals-based or cash flow-based advisor?
You are going to get two entirely different experiences with each. Is the advisor hyper focused on investments or are they going to be reviewing and modifying your financial plan over time? There is a significant difference in the focus of each.

In closing

Understand those nuances and you will make a good hiring decision that will last a long time. A good financial advisor can add a lot of value to your life over time as you transition through the stages of life.

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