7 Secrets Smart Professionals Use to Choose Financial Advisors (2024)

Choosing a financial advisor is a major life decision that can determine your financial trajectory for years to come.

A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work with a financial advisor.¹

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.²

Consider this example: A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.³

SmartAsset Awards & Accolades

Advisors are rigorously screened through our proprietary due diligence process.

Being aware of these seven secrets when choosing an advisor can help you find peace of mind, and potentially avoid years of stress.

1.

Always Hire an Advisor Who Is a Fiduciary

By definition, a fiduciary is an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and disclose any potential conflicts of interest to clients.

All of the financial advisors on SmartAsset’s matching platform are registered fiduciaries. If your advisor is not a fiduciary and constantly pushes investment products on you,use this no-cost tool to find an advisorwho has your best interest in mind.

2.

Don't Hire the First Advisor You Meet

While it’s tempting to hire the advisor closest to home or the first advisor in the yellow pages, this decision requires more time. Take the time to interview at least a few advisors before picking the best match for you.

3.

Don't Choose an Advisor with the Wrong Specialty

Some financial advisorsspecialize in retirement planning, while others are best for business owners or those with a high net worth. Some might be best for young professionals starting a family. Be sure to understand an advisor’s strengths and weaknesses - before signing the dotted line.

4.

Don't Pick an Advisor With an Incompatible Strategy

Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.

5.

Always Ask About Credentials

To give investment advice,financial advisorsare required to pass a test. Ask your advisor about their licenses, tests, and credentials. Financial advisors tests include the Series 7, and Series 66 or Series 65. Some advisors go a step further and become a Certified Financial Planner, or CFP.

6.

Understand How They are Paid

Some advisors are "fee only" and charge you a flat rate no matter what. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds, a serious conflict of interest. If the advisor earns more by ignoring your best interests, do not hire them.

7.

Hire a Vetted Advisor

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.

Our no-cost tool helps make it easy tofind qualified financial advisors who serve your area. Now you can get matched with up to three fiduciary investment advisors that are vetted and subject to our due diligence criteria. The entire matching process takes just a few minutes.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments.

We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.

Other than application and licensing fees, SmartAsset did not provide compensation for the aforementioned awards.

Sources:
1.“Planning and Progress”, Northwestern Mutual (April 2020)
2.Journal of Retirement Study Winter (2020) . The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in theJournal of Retirement study.
3. Vanguard (Feb. 2019), Putting a Value on Your Value The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in theVanguard whitepaper.

Terms of Use | Privacy Policy | About Us | Form ADV Part2A


© 2022 SmartAsset