When I interviewed to become a financial advisor in the 1980s, I was sure I’d get the job, primarily because I was a CPA.
I’ll never forget the response I got when I mentioned my credentials to the guy conducting the interview. He literally said, “I’d rather have a used car salesman sitting across the desk from me right now than a CPA.”
I thought it was a knowledge job. Turns out, it was a sales job.
Even though that was a long time ago, it illustrates how the financial advisory business earned its often less-than-stellar reputation.
But here’s the thing: If you can find good financial advice, it can change your life.
A Vanguard study found that, on average, a hypothetical $500,000 investment over 25 years would grow to $1.7 million if you manage it yourself, but more than $3.4 million if you work with a financial advisor.
That’s twice as much. That’s life-changing.
So, how do you find a quality financial advisor? Here are a few simple tips, as well as solid resources to make the search much simpler: ones that didn’t exist back in my day.
1. Talk to several
Imagine if you’d married the first person you ever dated.
Whether you’re seeking a spouse or searching for money advice, it pays to shop around. That’s the only way you’ll know when you’ve found Mr. or Ms. Right.
Years ago, when I was an advisor, this wasn’t easy. These days, however, there are no-cost online services that make discovering your ideal financial advisor a snap. You fill out a short questionnaire, then get matched with up to three local financial advisors. The process only takes a few minutes, and in many cases you can even get a free consultation.
If you’ve got at least $100,000 in investments, one free service to check is SmartAsset. You fill out a short questionnaire and instantly get matched with up to three vetted financial advisors in your area.
2. Make sure they’re a fiduciary
This is crucial. A fiduciary is legally required to act in your best interests. Some advisors promote products that pay them higher commissions, even if they’re not ideal for you. (In other words, they’re salespeople.)
Your interests should come first, so only consider fiduciaries. Ask advisors straight up if they’re fiduciaries, and don’t just take their word for it.
Wealthramp is a free service that matches you with fiduciary advisors who have been personally interviewed and evaluated by founder Pam Krueger, co-host of the MoneyTrack series on PBS television, and someone I’ve known personally for 30 years.
3. Ask about fees and compensation
Financial advisors make money in different ways, like hourly rates, annual retainers, or fees based on assets under management. Others earn commissions promoting certain investments.
Be sure you understand exactly how an advisor gets paid before signing on, and avoid anyone who gets paid the way I used to: commissions.
It’s very difficult for an advisor to stay objective when one potential solution pays them 10 times more than another one.
If you’ve got at least $150,000 in investments, a free service called Zoe Financial will review your financial goals, match you with a curated selection of advisors, then get you a free consultation.
4. Check their credentials and experience
Someone who’s been giving financial advice for 20 years will likely cost the same as someone who’s been doing it for 20 months. While experience isn’t everything, it’s something I’d look for, whether it’s a doctor, a mechanic or a financial advisor.
Any good financial advisor will also hold certifications like CFP (Certified Financial Planner) or CFA (Chartered Financial Analyst). These require rigorous training and continuing education. Be wary of advisors without solid credentials. It may indicate they lack expertise or interest in their career.
WiserAdvisor.com is a no-cost, no-obligation service that has matched more than 100,000 people with a financial advisor since 1998.
Do you even need an advisor?
The reason to pay an expert of any kind — doctor, lawyer or financial advisor — is to get the right answers to critical questions.
If you’re 21 and dropping a little money into a 401(k) every month, provided you’re willing to do a little reading, you’re fine on your own.
But as you get older and start accumulating significant savings, your money gets more complicated, and the repercussions of your decisions more severe. Sure, a good advisor can guide your investments, but they can do a lot more. They can create a full financial plan for you. They can help you reduce your income taxes, plan your estate, set a retirement date, offer Social Security claiming advice, and plenty more.
They can also help you avoid costly mistakes, reduce your stress and free up your time.
But the greatest service any professional provides is peace of mind: confirmation you’re on the right track. Being a second set of eyes. And maybe one day, being there if you can’t be.
If you’re not sure if an advisor is for you, no worries. That’s what a free consultation is for. Click the links in this article, or see all these suggestions and more at our Financial Advisor Comparison.
Get a free consultation. It can’t hurt, and it could change everything.
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