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How to Choose a Financial Advisor

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How to Choose a Financial Advisor

If you’re looking for a financial advisor, you may be unsure of where or how to start your search.

The sea of financial advisors you have access to is endless.

However, not all financial advisors are worth the rates they charge.

I’m sure you’ve heard the horror stories of investments gone wrong (think Bernie Madoff), whether by intentional deception or by way of lack of knowledge.

So, how do you choose a financial advisor that will help you increase your assets instead of decreasing them?

Luckily, there are steps you can take to minimize your risk and help you find a financial advisor that’s best suited for you--and at a price that fits your style.

Recommended financial advisors

Robo-advisors

Why we like Betterment:

Betterment is a clear leader among robo-advisors with it low yearly fees and it's $0 account minimums.

>> Read our full review

Management fee: .25%

Account minimum: $0

Promotion: Up to 1 year free

Why we like M1 Finance:

M1 Finance empowers you to manage your money and build wealth with ease. Just create and automate your portfolio and we'll take of the rest.

>> Read our full review

Management fee: $0

Account minimum: $0

Promotion: Allows you to invest for free

Online financial planning services

Why we like Facet Wealth:

Facet Wealth offers dedicated CFPs and charges a flat fee based on how much financial advice you require. Investment management is included.

>> Read our full review

Management fee: $480 to $5,000 per year.

Account minimum: $0

Why we like Personal Capital:

Personal Capital is a hybrid robo advisor that offers human advisors as well as automated investing tools.

>> Read our full review

Management fee: .89%

Account minimum: $100,000

Promotion: 2 free months of financial advisory services

What to Look for in a Financial Advisor

Interestingly, there are various types of titles and certifications in the world of investing and financial planning.

There’s the Certified Financial Planner (CFP), the Certified Public Accountant (CPA), the Chartered Financial Analyst (CFA), the stockbroker, the investment advisor, and dozens more.

How can you know which type of advisor is best for you?

What questions should you ask?

What services do you need?

We’ll give you the rundown on how to choose an investment professional based on your needs.

Then we’ll show you tips on how to find the best financial advisor you can.

10 Questions to Ask Before You Choose a Financial Advisor

Finding the right advisor for you starts with knowing what you need.

Typically, financial advisors tend to specialize in certain client areas.

For instance, some advisors have minimum investment amounts they work with.

Some advisors specialize in helping those near or in retirement.

Other advisors specialize in helping young people just starting out.

And yet, others specialize in estate and trust planning.

You might want someone who can help you find the right investment products to buy in order to grow your wealth.

Or you might want someone to help you minimize tax liability.

Or plan financially for early retirement.

To help find the right financial advisor for your needs, start by asking the following questions of advisors you're considering.

And keep a chart of each potential advisor’s answers.

That way you’ll have a quick-access guide as you work to choose the best advisor for you.

What types of clients do you typically serve?

Look for advisors that tend to serve clients in similar situations as yours.

Are you a beginner investor?

Search for advisors that are experienced in working with new investors.

If you’re heading toward retirement, look for an advisor that focuses on serving the 50+ crowd.

Investment needs are different for the varying people groups and financial situations.

Therefore, you’ll want to ensure the advisor you choose has experience helping people in situations similar to yours.

What are your qualifications?

Another question to ask is that of an advisor’s certifications and qualifications.

Again, the qualifications financial professionals can acquire is vast, and it’s on you to research each type of qualification.

Doing so will help protect you as you work to hire the type of professional that’s best suited to your needs.

For instance, a CFP’s job is to help you strategize and plan your financial growth.

Conversely, the typical CPA is best at helping you minimize your tax liability and plan for that in the future.

Learn about the various qualifications of financial advisors, and then decide which type of financial professional you want to work with.

What services do you offer?

This question kind of piggybacks off of question two. When you know the types of services the advisors you’re interviewing offer, you’ll better be able to choose the right professional for you.

Decide in advance what you’re looking for. Are you looking to invest and grow your money?

Are you in need of trust and estate planning services?

Be sure to ask all interviewees what services they offer, so that you can narrow down your list of choices to the advisors who can help you with what you need.

Who do you work for?

This may seem like a silly question. However, there’s a method to my madness here.

You see, some advisors work independently. Some work for an independent investment firm. Others work for brokers that are owned by insurance companies or banks.

Your goal?

Find an advisor who doesn’t work in a situation where there could be a conflict of interest. 

For example, a brokerage firm that’s owned by an insurance company may try to urge you to buy the insurance company’s products--even if they’re not what you need.

Or, they may charge higher fees when you buy products outside of the ones their company owns.

The more independent your advisor is of companies that own investment products, the more unbiased opinions on investments you’ll likely get.

What is your primary method of communication, and how often will I hear from you?

Knowing a potential financial advisor’s method of communication is important too. You’ll want the advisor’s communication style to match yours.

Are they primarily a hands-off communicator?

Will you get your quarterly or annual investment statement and that’s it?

If that’s okay with you, that’s fine. However, you might prefer an advisor who keeps in regular contact with his or her clients.

If you want to have monthly check-ins with your advisor, find an advisor who practices frequent communication with clients.

Are you a financial fiduciary?
It’s a standard that is meant to protect investors, and there can be legal consequences for fiduciaries that act unethically (again, think Bernie Madoff).
Do you have any disclosures?

Disclosures are negative reports (complaints) from clients on an advisor’s compliance record.

You may be surprised to know that financial advisors can have multiple complaints on their record and still stay licensed to give investment advice.

Websites such as BrokerCheck allow you to enter an advisor’s name to see if they have any negative disclosures recorded against them.

You can certainly ask a potential advisor if they have any disclosures, but I always recommend checking for yourself.

If an advisor has several complaints against them, it may be best to move on.

What are your fees?

Advisors have different fee scales, and it’s important for you to know what they are as you search for an advisor.

Get concrete numbers on fees for each interviewee.

Make sure you understand what an advisor’s annual fee will be, as well as how much they charge for individual transactions during the year.

How long have you been in your field?

It’s important to know how long your advisor has been in the field, however, don’t automatically count new advisors out.

New advisors may have more updated investing information than the guy who’s been doing this for 30 years.

In addition, new advisors might be more eager to gain your kudos and work extra hard to do good work.

If you meet a newer advisor you like, don’t hesitate to ask him or her why you should choose them over an advisor with more experience.

Their answer might just win you over.

Okay, you know what to ask as you interview advisors, but where do you look to narrow down your field of selection and find a quality advisor?

How to Find a Good Financial Advisor

You know what you need to look for as you choose a financial advisor.

You know what qualifications you’d like your advisor to have, and how to check to see if they have any negative disclosures.

However, there's more you need to know about the world of investment advisors.

Decide What Type of Advisor You Want

So, where do you go when you want to narrow down your search for a financial advisor?

You’ll want to start by deciding what type of advisor services you want.

Here are three options you have.

Robo-Advisor

A Robo-advisor is the most hands-off (and usually the cheapest) type of financial advisor you can have.

With a bobo-advisor, you have a digital investment service as opposed to an actual advisor.

You answer questions as directed by the bobo-advisor, and investment choices are suggested and/or purchased based on the results of the computer algorithms. 

It’s an automated investment process that helps you build an investment portfolio based on your risk tolerance level and other factors.

Robo-advisors are typically quite affordable.

For example, Betterment charges a 0.25% annual fee based on your investment balance. And there’s no minimum dollar amount to start investing.

Another Robo-advisor, Wealthfront, has a $500 minimum balance for investing, and charges that same 0.25% annual fee.

Robo-advisors are best for people who want the lowest-cost advisor and/or don’t need a total financial plan.

Related article: 5 Best Robo-advisors Based on Their Performance

Online Financial Advisors

Online financial advisors coach you from the web.

They’re usually less expensive than in-house advisors.

You can ask the same types of interview questions with an online financial advisor that you would with an in-house advisor, but you may find it difficult to communicate in an online-only fashion.

Costs for online advisors are typically higher than for Robo-advisors, but they offer more personalized and expansive services too.

The services you get from an online advisor are often the same as you get from an in-house advisor.

An online advisor like those with Personal Capital have varying minimum investment amounts, but the minimums are sometimes lower than what you’ll find with an in-house financial advisor.

Fees for online advisors are often lower as well.

Online financial advisors may be best if you want more comprehensive financial planning services at a lower cost than traditional financial advisors typically charge.

Traditional Financial Advisor

A traditional or in-house financial advisor is the advisor who works in a brick-and-mortar office right in your own area. You’ll walk into his or her office and discuss your investments face-to-face.

If you’re looking for more of a personal touch, a traditional financial advisor may be best for you.

However, know that traditional financial advisors usually charge more than online advisors.

They may have higher minimum investment thresholds as well.

A traditional financial advisor may be best for you if you’re looking for that hands-on, personal touch in financial planning services.

Get Recommendations From Friends and Family

As you work to decide what type of advisor you want, it might be helpful to consider where to shop for advisors.

One great way to find a financial advisor is to get recommendations from loved ones.

Talk with people who have used their financial advisor for a while and have positive returns on their investments.

Note that numbers alone don’t count; some of your loved ones might prefer lower-risk investments and will thus likely have a lower ROI.

Therefore it’s important to ask specific questions about why your loved one likes their advisor and what he or she has done to help them.

Ask how long they’ve used their advisor and how the advisor has handled market downturns too.

The point is to get detailed answers on how their advisor has helped them improve their financial situation.

Ask for References

Once you’ve nailed down your top three or so choices for financial advisors, it’s okay to ask the advisor for references.

A good financial advisor should be able to give you at least two or three references who will testify to their services.

Ask references the same types of questions you’d ask a loved one about an advisor they use:

  • How long they’ve used the advisor
  • How they feel about the advisor’s performance with their investments
  • What they don’t like about the advisor

And so on. This is your chance to get a real-life review of an advisor’s work.

Check Online

Sites like NAPFA (National Association of Personal Financial Advisors) can help you find financial advisors in your area.

This site will give you names of traditional financial planners, and you can check their disclosures and do other research from there.

If you’re looking for an online advisor or Robo-advisor, you can check online for reviews or check a site such as Trustpilot.

Checking for online reviews will help you narrow down your list of options as well.

After You’ve Made Your Selection

Once you’ve decided on an advisor, it’s important to keep an eye on the investments you and your advisor decide to partake in.

Having a financial advisor doesn’t free you from having to make investment decisions.

Your money is still your money and should be protected as such. 

Monitor your investment account regularly, but don’t panic at fluctuations.

Your goal should be to buy and hold for the long term if you’re looking for steady growth in your money.

And when your advisor recommends a fund, check a site like Morningstar to get independent ratings on the fund.

Doing so can help protect your money from advisor errors.

What's Next?

Choosing a financial advisor can be overwhelming, but knowing what you're looking for is a great start.

Follow that up with knowing where to look and what questions to ask.

If you conduct thorough research, finding a good financial advisor should be a successful journey.

Recommended financial advisors

Betterment logo

Low-fee robo-advisor with no minimum investment. Creates fully-automated portfolios based upon your desired allocation.

M1 Finance logo

M1 Finance empowers you to manage your money and build wealth with ease. Just create and automate your portfolio and we'll take of the rest.

Facet Wealth logo

Facet Wealth offers dedicated CFPs and charges a flat fee based on how much financial advice you require. Investment management is included.

Personal Capital Logo

Personal Capital is a hybrid robo advisor that offers human advisors as well as automated investing tools.


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