How to Select Your Financial Advisor
With so many financial advisors to choose from, how do you know who to trust with your money? It's perhaps one of the biggest - and most important - financial decisions you can make. Some may have your best interests at heart, while others may not.
Finding the right one to guide your financial future can be a daunting task, but the long-term rewards are worth it. Take the time to find someone who will be the best fit for you.
For example, if you are looking to save for retirement, you want an advisor with experience in retirement planning. If you are looking to reduce your current tax burden, you want an advisor with expertise in tax planning. If you have a complex benefits system like AbbVie, you want someone who knows that system very well.
Other types of financial advisors might specialize in employee benefits, estate planning, investment management, or a more complex financial situation. Ideally, whatever your wealth goals are, you want a fiduciary financial advisor. A fiduciary is legally bound to act in your best interests at all times, not their own.
5 Tips on How to Choose Right Financial Advisor
It is crucial to do your research and choose a trustworthy financial advisor that is most suited to your needs. Here are a few things to keep in mind:
- 1) Qualifications and experience
Make sure your financial advisor has the proper qualifications and professional experience. We explain all the relevant qualifications and experience in more detail here.
- 2) Compensation
Financial advisors either receive a commission or a fee. Make sure you understand how your advisor is paid and what that will mean for you – and the quality of advice you receive.
Commission-based advisors earn commission on financial products they sell, as do fee-based advisors. Fee-only financial advisors charge an upfront hourly rate, flat fee, or by AUM (Assets Under Management).
The fee schedules for all the advisors at Chicago Fee-Only are readily available for you to view here, so you know exactly how much you are paying, and there are never any surprises.
- 3) Fiduciary standard
Your financial advisor should have a fiduciary duty to you. As we mentioned above, a fiduciary is required to act in your best interest, so you know they are always working for you and not themselves. At Chicago Fee-Only, all our advisors are fiduciaries.
- 4) Financial goals
Make sure you and your financial advisor are on the same page when it comes to your wealth goals. Be clear about your entire financial life and objectives before meeting with potential advisors. This will help you identify the ideal type of advisor for you.
Do you want to retire comfortably? Save for a child's education? Build up your investment portfolio? Once you know what your goals are, you can start to narrow down the field of potential advisors.
You also want to make sure the advisor's investment strategy aligns with your own risk tolerance and investment goals. Do they invest mainly in stocks, bonds, or mutual funds? What about real estate or other alternative investments?
- 5) Trust and Communication
Perhaps the most important thing is having a trusted relationship with your financial advisor. You should be able to communicate easily with them. If you don't feel like you can, it may be time to find someone else.
Your financial advisor should also be transparent with you and provide all the information you need to make informed decisions. They should also be able to answer any questions you have about their services and your investment management.
How Do You Find a Good Financial Advisor?
The best way to find a financial advisor is to ask for referrals. Friends and family who have worked with a financial advisor are a great resource for finding one. The National Association of Personal Financial Advisors (NAPFA) provides a searchable database of fee-only advisors. You can also look for someone certified by the Financial Planning Association or a registered investment advisor with the Certified Financial Planner (CFP) Board.
Unfortunately, not all financial advisors are fiduciaries. If they're not, they may have conflicts of interest that could bias their financial advice and adversely impact your personal finances.
Once you have found a few potential advisors, the next step is to schedule a consultation. This is an opportunity to get to know the advisor and ask any questions you may have about their experience, financial planning services, and compensation. You should also bring your financial documents (copies or digitally) with you so the advisor can get a comprehensive picture of your current financial situation.
9 Questions to Ask a Prospective Financial Advisor
You'll learn a lot more about the advisor if you ask these questions, including whether they have the financial tools to help you get the results you want with your wealth management.
Don't just go with the first financial advisor you come across. It's perfectly fine to consult with multiple advisors until you find the one for you. Do your research and compare different advisors before deciding. It's also important to check the background of any potential advisor.
How to Check an Advisor's Background History?
The Financial Industry Regulatory Authority (FINRA) is a good resource for checking the backgrounds of financial advisors. FINRA is a non-profit organization that protects investors by regulating the securities industry. FINRA is the largest independent regulator for all securities firms doing business in the United States.
You can research your potential financial advisor's credentials on the FINRA website to see if they have any disciplinary actions or complaints filed against them and to confirm they are a properly registered certified financial planner (CFP).
You'll find good news about the Chicago Fee-Only advisors team members - no complaints or disciplinary actions have ever been filed against any of our advisors. All our advisors are Certified Financial Planners, and we have a wealth of qualifications and credentials (see here for more information). And if you haven't already guessed: we're proud to be fiduciaries. It's important to us that we always put our clients first.
Getting Started with Financial Planning Services
We hope this guide gives you a good starting point to choose the right financial advisor for you and your family. Feel free to reach out to us if you have any more questions or want further advice.
At Chicago Fee-Only, we believe that everyone deserves access to sound financial planning and investing advice, and we're committed to providing it. Chicago Fee-Only offers free initial phone consultations as your first meeting. Our advisors will review your situation and recommend what good financial advice can do for you.
If you're ready to start your financial planning journey, contact us or one of our advisors today to schedule an obligation-free consultation. We look forward to helping you move toward wealth.