Your Guide to Choosing the Best Financial Advisor for Your Needs
The right one will help you maximize your benefits, manage your budget, and achieve your most significant life goals, says one of our experts.
Finding a financial advisor can be an intimidating process—especially if you've never done it before. "This is the person you are hiring to help you achieve your most significant life goals," says Lauren Anastasio, a certified financial planner at SoFi. Talk about some serious pressure. But armed with these four tips, you can feel confident that you will find the best financial advisor for you.
Look for a fiduciary advisor.
Ethics are important when it comes to trusting someone with your money, but unfortunately, not all financial advisors are bound by an ethical code that puts their clients first. That's why it's so important to find a fiduciary, or a financial planner who has pledged to put their clients' needs ahead of their own interests. Certified financial planners (CFPs) are held to a fiduciary standard.
Julie Quick, certified financial planner and the founder of Cultivate Financial Wellness, says you can use the website Let's Make a Plan to find a fiduciary advisor in your area. If you need a specific kind of advisor, XY Planning Network will help you find a fiduciary advisor by their specialty. You can also use the tool BrokerCheck on the website of regulatory body FINRA to research a potential planner, Quick says. The tool will show you whether an advisor or firm has disclosures—which can include disputes, disciplinary events, and criminal matters—on their records. "Let me be clear: just because someone has a disclosure does not mean you shouldn't work with them," she says. "Some disclosures may involve pending actions or allegations that have been settled or haven't been resolved or proven. But ask them about it. In this litigious society, there may very well be a good explanation—but beware if you see a number of severe disclosures."
Consider how an advisor makes money.
Financial advisors can be compensated for their work in a variety of ways: they could collect a percentage of the assets that they manage, earn commission, or be fee-only—in other words, charge a flat fee for the services they provide. "Whatever a planner's compensation structure looks like, just be certain it's something you are comfortable with," says Anastasio. For example, you might not like the idea of working with someone who makes money when they sell you something. "It's a matter of personal preference, but a very important consideration," she says.
Nicole T. Strbich, certified financial planner and director of financial planning at Buckingham Advisors, cautions you against working with any advisor who can't clearly explain to you how they are compensated—or what you are paying for their services. "If you ask questions and they tell you 'not to worry about it,' or if their pitch sounds too good to be true, then you may not be getting all of the necessary information" to make an informed decision about them, she says.
Make sure they're an effective communicator.
When it comes to questions about your finances, you won't want to be left hanging. So, take note about how quickly a potential financial advisor responds to you, how willing they are to answer your questions, and how clearly they communicate in your initial call or meeting, says Strbich. (Come prepared with plenty of questions to ask.) You should leave feeling comfortable and confident, not confused. After all, Strbich points out, if your financial advisor can't effectively communicate the steps you need to take to reach your financial goals, you may never reach them.
And make sure they offer what you need.
People need financial advisors for a variety of reasons—from planning to investments and taxes—and Strbich recommends you find someone who can see the entire picture. "Find a planner that can help you complete regular strategic planning for all of these items to maximize your benefits," she says. "Addressing just part of these considerations can lead to clients missing opportunities to make small changes that could have a substantial positive impact in the future."
At the same time, you may want to search for a specialist—someone who has a deep knowledge in what you uniquely need. "More and more planners are specializing in a specific niche," says Quick, adding that some financial advisors cater to specific occupations while others focus on certain stages of life. She suggests you take time to consider your needs before hiring an advisor, then adding those keywords—like "freelance worker" or "retirement"—to your initial search.