How Should I Choose a Financial Advisor? – 7 Tips to Consider

How Should I Choose a Financial Advisor? – 7 Tips to Consider

26 Nov 2019

People often ask the question, “how should I choose a financial advisor?” – and they should be. Working with an advisor is an important first step towards achieving your financial goals and objectives. If you’re beginning your search for the appropriate advisor you’ve come to the right place – consider these 7 tips and get started in the right direction.

  1. Hire an Advisor Who is a Fiduciary
    What is a fiduciary anyways? A fiduciary is an advisor who is bound to act in their clients’ best interest. In other words, they must put their clients’ interests ahead of their own at all times. This is a good thing! And a great first step in how to choose an advisor. Surprisingly, not everyone providing financial advice is a fiduciary. In fact, only 1 out of 10 advisors are true fiduciaries. Instead, they often earn sales commissions for the products they offer to investors, giving them an incentive to recommend products that aren’t always best for you but might earn them a large commission. Operating in a fiduciary capacity means completely eliminating potential conflicts of interest and ensures that any action that your advisor is taking is for one reason and one reason only – to benefit you. If you’re currently working with an advisor who’s not a fiduciary and are tired of them constantly pushing you to use their different investment products, it’s time to switch to an advisor who has your best interest in mind.
  2. Choose an Advisor that is Fee-Only 
    This ties in with choosing an advisor that is also a fiduciary, acting in your best interest at all time. An advisor earning commission may make short-term decisions to benefit himself and be less concerned with the long-term consequences this may have for his clients. A fee-only advisor does not earn any commissions. They are paid based on a percentage of your account size meaning that there is only one way for them to get a raise – if your account balance goes up. This provides many investors with peace of mind knowing that their advisor’s interests are completely aligned with their own. It provides clarity to investors when they know that the only reason their advisor would ever make a trade or investment is to increase their account balance. This is the kind of transparency you should look for and expect when choosing a financial advisor.
  3. Research Your Potential Advisors
    Think about it – are you really prepared to give your life savings to someone without even first googling their name and doing some research? Unfortunately, this is the sad reality we live in. People spend more time researching where to go for dinner or the most powerful blender to buy than they do when choosing a financial advisor. You’ve worked hard over your lifetime to accumulate assets for your retirement fund or other financial goals – you must be just as diligent when researching what financial advisor will be best for you.
  4. Interview Multiple Advisors
    If you needed a major medical procedure, would you put all your trust in the first doctor or surgeon that came across your radar? – of course not – you would meet with multiple physicians until you found the one that you were most confident in. Choosing a financial advisor should be no different. It is imperative that you don’t settle for the first advisor you meet until you have interviewed several advisors to find the best fit for your unique needs. This will increase the likelihood of a successful partnership between you and your new advisor.
  5. Look for Proper Credentials 
    Think again about the medical example – are you letting someone without an M.D. give you life-altering surgery? The answer is no. You are likely even looking for a specialist that is an expert in their field. The same rules apply when thinking about how to choose a financial advisor. Advisors are required by state law to obtain the Series 65, Series 66, or Series 7 license depending on how their business is regulated – but your search for an advisor shouldn’t stop at the minimum requirements. Look for an advisor that goes a step further to achieve a higher accreditation such as a Certified Financial Planner™ Professional (CFP®). This person will likely be an experienced expert, increasing your probability of success. In addition to proper credentials, seeking out an advisor who is also supported by a team of CFP® professionals will ensure your hard-earned savings are in the right hands.
  6. Look for Complete Comprehensive Planning
    When people begin wondering how to choose a financial advisor, the conversation often focuses on investment returns. While investment returns are important, it is essential to seek out a financial advisor that provides more value than just investing to their clients. You should choose a financial advisor that engages in complete and comprehensive financial planning.  Engaging in financial planning will have a much larger impact on your financial well-being over the long term than just investing alone. The reason you are seeking a financial advisor is to get your finances in order and achieve peace of mind about your financial future. Try and look at returns as just icing on the cake when it comes to all the other value your financial advisor should be adding to your situation.
  7. Demand an Explanation from Your Advisor
    The world of finances can be confusing at times – industry lingo is confusing, and some people struggle with numbers. This can make talking about your finances an intimidating topic, especially if your advisor is not helping you understand along the way. Demand an advisor that wants you to understand – not that leaves you in the dark. When choosing a financial advisor, it is important that they are willing and able to explain every recommendation they make along the way in a clear and common language that you can understand. If you have a question, ask it, and you should receive a crystal-clear answer from your advisor. It’s your money after all, and you have worked hard to earn it – you deserve to understand each step in the process.

Contact McGervey Wealth Management Today
By working with a fiduciary like McGervey Wealth Management, you can be assured you’re getting investment advice from a firm that has the obligation to disclose conflicts of interest and put your interests ahead of its own. We get to know you on a personal level and keep things simple, using common language everyone can understand. To learn more about McGervey Wealth, contact us today or get your wealth score to see how you stack up for retirement.

More About the Author: Matthew McGervey, CFP®, MBA

As a CERTIFIED FINANCIAL PLANNER™ professional, Matthew has a broad knowledge of personal financial planning strategies and solutions.