How to Hire the Right Financial Advisor

Point of Interest

Hiring the right financial advisor can result in a long-term financial relationship that increases your wealth, savings and understanding of the financial industry.

Just because a financial advisor pops up at the top of a Google search or they were recommended by an acquaintance does not mean they are the right fit for you. The relationship between the financial advisor and the client is a unique partnership that needs to meet several criteria or else your stress level, goals and bottom line may suffer. Understanding your needs and financial situation is the first step to finding the best financial advisors for you.

What is a financial advisor?

A financial advisor is someone who helps their clients make the best decisions for their future in regard to their money, wealth and assets. Sometimes the financial advisor is only involved in the planning and advising part of the equation, and at other times the advisor helps to execute the decisions made. In essence, a financial advisor can play as little or as large of a role as the client wants.

For some, financial advisors help them through a one-time, unique situation, and that’s the extent of the relationship. For others, a financial advisor helps to shape their entire financial plan for the next 10 to 50 years of their life.

The list of actual jobs a financial advisor should be able to handle is extensive. Hiring the right financial advisor requires knowledge of these different jobs. Before you can pick the best financial advisor for you, you’ll need to know exactly how hands-on you want them to be and what roles you’d like for them to fulfill. Some of the more common tasks handled by financial advisors include estate planning, retirement planning, investment selection and advising, debt management, insurance sales and more.

Reasons to hire a financial advisor

Here are four of the most common reasons people reach out to financial planning professionals.

1. Getting close to retirement

Any financial advisor worth their salt will be an expert in retirement planning, no matter if you’re planning on hanging up your hat in 5 years or 40. If you’re starting to hit the age where you’re thinking about retirement or your last day is coming into view, you may want to consider enlisting the help of a financial advisor.

2. After a major relationship or life change

Whether it’s a divorce, job change, career change, custody change or any other major life event, you’ll want to ensure you’re prepared properly. A financial advisor can not only help you through the process, but they can educate you on your options to ensure you’re not making any major mistakes.

3. When you’re ready to take control of your financial picture

Here’s the best news for those concerned about their financial future. There is no wrong time to reach out to a financial advisor to take control of your financial picture. Your situation does not need to be complex, and you don’t need to be going through a major life event to reach out to an advisor. In fact, getting control of your financial picture while the seas are calm might be the best idea.

How to choose the best professional financial advisor for you

Since the term financial advisor is so broad and all-encompassing, it’s important you find the right fit. Start by figuring out what you’re looking to accomplish. Are you looking for one-time help? Are you looking for a long-term partnership? If you’re looking for one-time advisement find someone who specializes in that single area of need. If you’re looking for a longer-term partnership, find someone who encompasses the full gamut of services.

Can this be a bit of an exhausting search? It should be. You’re not picking out a new pair of pants. You’re picking out someone to advise you on what to do with your money. This is a person whose expertise (or lack thereof) could have a dramatic effect on your future. Finding the top financial advisor with expertise in your areas of need is imperative.

“Ideally, you want to hire someone who specializes in your circumstances or demographics because they will be more effective handling your specific goals, concerns and needs,” says Michael E. Scheeler, a financial adviser with Avenue Wealth. “You wouldn’t have a heart surgeon do brain surgery.”

Here are some vetting questions to get you started in the selection process. Your full vetting process should go further than just asking a few questions, but this is a great jumping-off point to get the conversation started.

1. How many clients do you have that have been with you over one year? Five years? 10 years?

2. Do you have any commission arrangements with any companies?

3. What’s the longest it will take you to respond to a phone call from me?

4. What is your overall view on risk? How much risk do you think is safe for our situation?

5. Do you plan on retiring or leaving the business anytime soon?

What to watch out for when hiring a financial advisor

Any off-putting answers to the above vetting questions would be major red flags. If the advisor seems to have the right answer to every question and an unrealistically positive outlook on the future, this could also be of concern. Additionally, any financial advisors that have limited time in the industry, lack the ability to address basic financial issues or seem too busy and overworked should be avoided.

The cost of hiring a financial advisor

Financial advisors are available for one-time help or for ongoing partnerships. How much hiring an advisor costs will depend on how in-depth they get with your financial planning and what the agreed-upon fee structure is. There are three common types of fee structures you will encounter — hourly billing, management percentage billing, and commission-based billing.

Hourly billing, or fee-only as it’s sometimes called, will be the most expensive upfront. However, because there are no incentives to push particular products or other agenda, you can rest assured knowing you are getting information with your best interest at heart. Ongoing costs are often less expensive than the other options.

Management percentage billing is when the financial advisor takes a percentage of the total funds managed as compensation. For example, if the percentage is 0.50% and you have $100,000 in investments, you’d pay $500 annually for their help. If there is no additional commission-based compensation for the advisor, this can be a good structure as well. If they are successful in helping you grow your wealth, the amount they get paid grows as well

Commission-based payment is where the financial advisor is paid a small fee every time they execute a trade or sell a particular product. This may be the cheapest upfront, but it incentivizes the advisor to push certain products or make additional transactions to earn an additional profit. Ideally, you should avoid commission-based structures, as the information and advice you receive may not be ideal.

The Final Word

Making the decision to seek the help of a professional trained in financial advising is excellent. But make sure that you take the time to ensure you’re choosing a trusted financial advisor with a great track record who fits your unique set of needs. A few extra hours or days of due diligence can go a long way to protecting you and your family for years to come. The relationship between a financial advisor and their client can be a great one, as long as you make the right hire.

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Jason Wesley

Jason Wesley is a seasoned copywriter with a passion for writing about banking, tech, personal growth, and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill set with the rest of the world.

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