Having a financial advisor is almost like having a primary doctor.
Not everyone has one or sees the need for one, but having someone that understands your situation and puts your best interests first can be one of the most important relationships you develop in your life.
I personally just went through this and searched for a primary doctor and there were so many doctors and offices to choose from and I had no clue how to decide who was right for me (tip: make sure they're in network with your insurance).
The confusion of trying to find a financial advisor is similar, so here are 3 things to look out for that may help make the decision easier:
One of the most important questions you can ask a potential advisor is “how do you get paid?”
If you don’t understand their answer, it’s likely that there are hidden fees or different ways they’re getting paid based on what they recommend to you (such as commission for you buying one investment over another).
This can pose a conflict of interest because - the advisor might make more money if they recommend a certain investment to you, but that might not be the most suitable investment for your situation.
Another fee to look out for is their Assets Under Management (AUM) fee. The industry average is around 1% AUM. If you have any questions about fees, the advisor should be able to provide a full breakdown for you.
If you have $500,000 invested, a 1% fee would be $5,000 taken out of your investments.
An AUM fee of .25% with that same $500,000 invested would only be charged at $1250.
Relatability & Empathy
Generally, all advisors have the same basic knowledge about investments. What separates a good advisor from a bad advisor for you, is how well they can relate to your situation and how they can help you.
You’re trusting this person with your money and your future. You should feel comfortable with that person, right?
Most people reading this may have not worked with an advisor before and it’s definitely understandable.
It can be intimidating walking into an office where it feels like you’re going to get talked down to.
An advisor should have a deep understanding of your situation after meeting and while it’s difficult to measure this quality, you can generally get a good feeling if an advisor truly wants to help you build a better financial future.
With how quickly the world is evolving, it’s crucial for your advisor to be up-to-date with technology.
Technology helps advisors by streamlining processes such as portfolio rebalancing, deposits, calculating returns - and allows them to focus more of their time on you and your situation.
Instead of spending hours calculating returns and collecting paperwork, an advisor has more time to make sure your needs are met.
In the end, this will serve as a huge benefit to you by making the planning process easier and more convenient.
For example, opening an investment account or signing documents used to require a lot of paperwork and time and you generally had to go to their office to complete these things.
Now, if an advisor has adapted technology in their practice - almost everything should be able to be completed digitally and from the comfort of your home.
All in all, choosing a financial advisor is not an easy decision but having a clear understanding of what you’re looking for in an advisor may help narrow down the choices.
And don’t be afraid to ask them questions to make sure they're a good fit for you because you’re hiring them, not the other way around.
If it feels like an advisor is talking down to you from the beginning of the relationship, how do you think they’re going to answer questions you have about your money in the future?
Not ready to meet, but want to hear more from us?
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