7 Mistakes People Make When Choosing a Financial Advisor

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.

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 advisors specialize 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.

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. 

5. Not Asking About Credentials

To give investment advice, financial advisors are required to pass a test. Ask your advisor about their licenses, tests, and credentials.

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.

7. Trying to Hire an Advisor on Your Own

Chances are that there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.

This no-cost tool makes it easy to find a qualified financial advisor. Just answer a few questions about your financial situation. Then, you can compare up to three advisors local to you and decide which to work with. The entire matching process takes just a few minutes, and there is absolutely no obligation to work with any of your matches.

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