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6 Essential Steps to Hiring a Financial Advisor

Selecting a financial advisor is a major life decision, one that can alter your financial trajectory for decades to come.

A study from Northwestern Mutual found that 71% of American adults felt their financial planning needed improvement. Yet 29% work with a financial advisor.¹

While it’s true that hiring a financial advisor can help you maximize your retirement nest-egg, there are a few essential steps that should be taken before you choose who to hire.

Click Your State to Get Matched With Financial Advisors Who Serve Your Area

After you choose your state and answer a few questions, you can compare up to three advisors that serve your area and decide which to work with.

1.

Be Sure They Classify as a Fiduciary

A “fiduciary” is a person who is committed to putting their clients' best interests before their own. They are required to avoid conflicts of interest, disclose any potential conflicts of interest and to provide all relevant facts to their clients. Every financial advisor on SmartAsset’s matching platform is a fiduciary. If your advisor isn’t, be mindful that they aren't held to the same standards and may not necessary give recommendations that are right for your particular situation. If that’s the case, use our free tool today to get matched with an advisor that is held to the fiduciary standard. 

2.

Act Intelligently, Not Quickly

While it may be tempting to hire the first advisor you meet, don’t. Selecting a financial advisor is a serious decision. Going with the office conveniently positioned on your drive to work, or the Google listing that ranks first, may seem like a simple choice, but aren’t always good indicators of quality. Instead, take care to interview multiple advisors and pick the one who best aligns with your priorities.

3.

Don't Sign with a Mismatched Specialist

Like doctors, some financial advisors operate general practices. Others, however, specialize in more niche lines of work, such as retirement planning, small business financial planning, or high-net-worth estate planning. While most are perfectly capable of offering other types of advice, it’s best to find a fiduciary with the right expertise for your specific situation.

IN THE PRESS:

4.

Check their Credentials

Financial certifications are signifiers of expertise in a certain aspect of the financial industry. Those seeking a certification typically need to complete hours of coursework and then pass an exam. They also need to abide by professional ethics standards. Holders of certifications need to take continuing education courses in order to maintain their knowledge as well as their certification. 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.  

5.

Get Familiar With Their Pay Structure

Every financial advisor will be compensated for the services they provide for you; the only difference is in how that compensation is structured. Some are “fee only,” charging a flat rate for their services regardless of transactions. Others levy a percentage-based fee based on the total assets they manage. Others earn commission from mutual funds or other financial products, which present conflicts of interest. The bottom line? Make sure their fee structure isn’t inversely aligned with your interests and financial success.

6.

Seek Out Professional Recommendations Before Committing

Unlike filtering through online reviews of a new restaurant, or soliciting feedback from friends about handyman services, financial advisors are more challenging to vet independently. That’s why it’s imperative that anyone considering the services of a financial advisor ask for help in the decision-making process.

Our free tool makes it easy to find a qualified financial advisor. After answering a few simple questions, you’ll be matched with up to three qualified fiduciaries that serve your area.  The entire process takes just a few minutes, and your first consultation could be as soon as today.

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This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments.

We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.

Other than application and licensing fees, SmartAsset did not provide compensation for the aforementioned awards.

Sources:
1. Northwestern Mutual study (2020).
2.Journal of Retirement Study Winter (2020) . The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.
3. Vanguard (Feb. 2019), Putting a Value on Your Value The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results.  Please follow the link to see the methodologies employed in the Vanguard whitepaper.

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