4 Common Mistakes When Hiring a Financial Advisor

Making daily financial decisions is often challenging, so it’s understandable that many people struggle to make long-term financial choices.  This is when working with a financial advisor is valuable.  I recently added commentary for an article in U.S. News and World Report, outlining common mistakes investors make when hiring a financial advisor.  These four mistakes really stand out to me.

  1. Working with an advisor who is not a Fiduciary!  By definition, a fiduciary is bound, legally and ethically, to acts on behalf of someone else, putting their clients’ interest ahead of their own.  This is significant because not all advisors are fiduciaries, therefore they aren’t held to the same standard.  I encourage clients to do the research to uncover if an advisor is held to the fiduciary standard.
  2. Not understanding how their advisor is compensated.  Having a full understanding of their pay structure is helpful in determining if there are any conflicts of interest.  As an example, an advisor who is paid commission on the sale of products may suggest or use those products for the payout, not because they are best for the client but because it benefits them to do so.  The choices a fee only advisor makes may not be affected by those factors.
  3. Thinking all advisors are created equal. Don’t assume your advisor is a financial planner.  An advisor will select wise investments based on your stated goals.  They will monitor those investments and, ideally, shift your holdings at appropriate times.  However, a financial planner will consider those goals and investments while looking at the big (financial) picture, from insurance to legacy intentions to estate planning, etc.  Working with a planner tends to be a better fit for most people because our financial pictures are, or can be, complex.
  4. Failing to consider the advisors credentials. Has this individual secured an advanced certification such as the Certified Financial Planner™ designation?  Do they have a Series 7 or are they uncredentialled?  These are important questions to ask, as the answers address how qualified your advisor is at providing advice and how knowledgeable they are.     

How do clients avoid these pitfalls of advisor selection you ask?  Research, research and more research!  Research is important when making any purchase, so hiring an advisor should not be different.  Investors should seek to understand that some organizations are required to act as fiduciaries, while others simply use the title.  They should evaluate the qualifications of their chosen professional and investors should make sure the advisor compensation model is not in conflict with the clients’ interests.

Still have questions?  Reach out to Unified Trust for an unbiased portfolio review from a legal and ethical fiduciary. 

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