Worst mistakes you can make hiring a financial advisor - FOX21- Entertaining Delmarva One Click at a Time

Worst mistakes you can make hiring a financial advisor

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Choosing a financial advisor is a big decision.

Being aware of these seven common blunders when choosing an advisor can help you find peace of mind, and avoid years of stress.

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.

If your advisor is not a fiduciary and constantly pushes investment products on you, it's time to find an advisor who has your best interest in mind.

2. 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. Be sure to understand an advisor’s strengths and weaknesses - before signing the dotted line.  

3. Picking an Advisor with an Incompatible Strategy

Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.

4. Not Checking References

Most advisors are happy to offer references to prospective clients. Calling references only takes a couple of minutes, and it can help put you at ease when handing over the keys to your bank account.  

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. 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.   

6. Making Assumptions When They are Affiliated with a Reputable Brand

An advisor might appear qualified and professional due to an association with a major firm like J.P. Morgan or Morgan Stanley. Working with an advisor from a reputable firm can lead to stability and better tools and information. However, choose an advisor because they are the best fit, not because of their branding.  

7. 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. If the advisor earns more by ignoring your best interests, do not hire them.

How to Find the Right Financial Advisor for You

Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is legally bound to act in your best interests. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

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