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.
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