7 Mistakes to Avoid When Choosing A Financial Advisor

7 Mistakes to Avoid When Choosing A Financial Advisor

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A financial advisor can help with a variety of financial tasks like investing and making a financial plan. However, it’s important to choose the right financial advisor. If you need an advisor’s help urgently, it’s easy to make the mistake of hiring the first one you find instead of taking the time to find the right advisor for your needs.

Avoid these mistakes when looking for financial planning in Orlando.

1.  Hiring the First Financial Advisor that You Meet

It’s possible that the very first financial advisor that you meet with will be the right one for you. However, it’s a good idea to shop around first and meet with several advisors so you can compare what they offer and how well you think they would work for you. If, after more research and meeting with others, the first advisor turns out to be the right choice, then you can go ahead and hire them. It is important, however, to make sure you take the time to interview several so that you know for certain you’re working with the right advisor.

2.  Hiring a Non-Fiduciary Advisor

A financial advisor who is a fiduciary has to take only actions that are in their client’s best interest. Non-fiduciary advisors are bound to take beneficial actions for their clients, but that action doesn’t have to be the best possible one and it’s possible that a non-fiduciary may choose an investment that earns them a commission so long as it’s still good for the client. On the other hand, a fiduciary must choose the best possible action for the client.

Before hiring a financial advisor, make sure that they’re a fiduciary.

3.  Hiring an Advisor with the Wrong Specialty

A financial advisor tends to specialize in a particular area of expertise. Some are more familiar with retirement planning, while others prefer wealth management for high-net-worth individuals. Other financial advisors specialize in helping people plan for starting families or a big purchase like a house or a car. If you have specific financial needs, it’s important to make sure that your financial advisor specializes in that particular need. A financial advisor whose specialty is in line with a specific need of yours will be better able to help you.

4.  Not Asking How They Are Paid Before Hiring

Different financial advisors are paid in different ways. Some make commissions on certain financial products and others are solely fee-based. Some may do a combination of the two. A financial advisor who is receiving commissions from a mutual fund or other investment may have a conflict of interest that could result in them taking actions on your behalf that, while still good for you, aren’t the best possible for you. Before you hire a financial advisor, be sure to ask how they are paid.

5.  Not Checking the Financial Advisor’s Credentials

Another mistake that people make when they hire a financial advisor is to not check for their credentials ahead of time. There are different qualifications that financial advisors can earn for different skills. It’s a good idea to ascertain that your prospective advisor is licensed in the areas you need so that you can get the most qualified advice on any questions you may have.

Ask a prospective financial advisor what tests they’ve taken and which licenses they’ve earned. They may have taken the Series 7, 65, or 66 tests. Some go as far as to become fully licensed CFPs, or Certified Financial Planners.

6.  Hiring a Financial Advisor Whose Strategy Isn’t Compatible with Yours

Each financial advisor you interview may have a different strategy when it comes to investments and meeting financial goals. While your advisor will bring their experience and knowledge to helping you manage your investments and finances, it’s important that their strategies align with your comfort. Some advisors, for example, recommend more aggressive investment strategies. If you’re more comfortable with a conservative strategy, then such an advisor may not be the best match for you. Before you hire, ask the prospective advisor about their strategies.

7.  Not Checking Reviews Before Hiring

While hiring a financial advisor isn’t the same as buying something online, it’s still a good idea to check out reviews before you hire. There are websites available where you can search for advisors in your area and see what other clients of theirs thought of their services. This can help you to find potential financial advisors as well as narrow down your choices before you start meeting with anyone.

Finance