Doing Your Homework When Choosing A Financial Advisor

Many people find the task of investing their money uninteresting or even overwhelming. While I suggest you make it a point to learn the basics when it comes to investing, I realize that not everyone is cut out to be their own financial advisor. For this reason, it may make sense to hire a professional to handle your money for you. In this post, I am going to show you what you should be looking for when choosing a financial advisor.

It’s A Relationship

The first thing you need to keep in mind when hiring a financial advisor is that you are entering into a relationship. Many people overlook this key point. For a relationship to be successful for the long-term, you need to trust each other and have open communication. After all, no one wants to have to find a new advisor every few years. You want to find someone you can be with for the long-term.

These are two things you should be looking for right from the start. When you have an initial meeting, take note to how you feel about the person. Listen to your gut. The first meeting should simply be a meeting where the two of you feel each other out to see if you are a good fit for one another.

It should be a red flag if the advisor wants to charge you for this meeting or if they are open to bringing you on board without knowing anything about you or your finances.

Additionally, you need to convey what your goals are and what you value in terms of life. This will help the advisor get a better sense of you and if you are a good fit. For example, it you are a conservative investor and the advisor is constantly talking about complex options strategies, they are probably not the best fit for you.

Are They A Fiduciary?

Not many people ask about this, but it is huge. What is a fiduciary? If an investment firm is a fiduciary, they have to put your best interests first. This means your goals and needs should be addressed before any investment is made. Sadly (and maybe surprisingly to some reading this) not all advisors are fiduciaries. Yes, they all take your needs and goals into account, but an advisor that is not a fiduciary can put you into a product they get a nice kickback from. A fiduciary will not do this.

Because of this, it is important to ask if they are a fiduciary.

Do Some Background Checks

It is easy to search online to see if an advisor is who he or she says they are. Don’t take their word for it, because you could end up broke or with a lot less money if they are really operating a scam. Luckily, there are some free tools online to check them out. Three great starting points are:

Any of these resources will help you to gather more information on the advisor you are considering and confirm (or deny) they are who they say they are.

Final Thoughts

Remember, at the end of the day, it is your money. No one – including your financial advisor – cares more about your money than you do. So it should not even be a question if you should research investment advisors before using them to invest your money. You have to do the homework to verify everything. On the surface it might seem like a lot of work, but it will save you many headaches and potentially a lot of money if you do the work and make sure you are with someone credible than if you just wing it and go with the first name you come across.

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