How to pick a financial advisor

Picking a financial advisor can be daunting, as this person will be responsible for helping you manage your money and make important financial decisions. It's important to take the time to carefully research and choose the right financial advisor to ensure that your financial goals are met.

One of the most important aspects in determining who to hire as your financial advisor is whether or not they are a fiduciary. A fiduciary is someone who is legally obligated to act in your best interest, so always ask any prospective financial advisor whether or not they are a fiduciary. You should not work with someone who is not.

Along with the fiduciary obligation, you should determine the advisor's payment structure. Generally, financial advisors are either commission-based or fee-based. You should look for fee-based. Commission-based advisors are compensated based on the products they sell you, which can lead to advisors only investing in products that will get them the biggest commission. Commission-based advisors are often not fiduciaries, which is a significant concern. Fee-based advisors charge either a flat or hourly rate or a percentage of the total assets they are managing for you, which incents them to do the best thing with your money. Fee-based advisors are usually fiduciaries.

Another thing to consider when picking a financial advisor is researching their qualifications and experience. Look for advisors with relevant professional credentials, such as a CERTIFIED FINANCIAL PLANNER™ certification, and with a track record of success in helping clients achieve their financial goals.

It's also important to consider the advisor's investment philosophy. Do they have a risk-averse approach, or are they more willing to take on risk in pursuit of higher returns? Ensure their philosophy aligns with your financial goals and risk tolerance.

Another key factor to consider is references. Ask the advisor for references from past clients and take the time to speak with them about their experiences working with the advisor. This can give you a good sense of the advisor's professionalism and how they have helped their clients achieve their financial goals.

It's also essential to choose an advisor that you feel comfortable with. You will be working closely with this person, so it's important to find someone you feel comfortable communicating with and who understands your financial needs and goals.

Don't be afraid to shop around. It's important to find an advisor you trust and feel comfortable with, which may require speaking with several different advisors before making a decision.

Finally, as a word of caution, be wary of advisors who ask you to give them blanket power of attorney over your finances. They might explain it as a way to make things easier for you because you don't have to be involved in every transaction, but there are limited powers of attorney they could use instead for that purpose. By providing a blanket or unlimited power of attorney, you are giving that person total control over your finances, which almost never leads to a good outcome.

Picking a financial advisor requires careful research and consideration. Look for advisors who are fee-based fiduciaries, have relevant qualifications and experience, a philosophy that aligns with your own financial goals, have positive references, and who you feel comfortable working with. By choosing the right financial advisor carefully, you can ensure that your financial goals are met, and your money is being managed responsibly.