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Top 3 Tips for Choosing a Financial Advisor

Top 3 Tips for Choosing a Financial Advisor

| September 19, 2023

When you need a lawyer, it’s usually because of an issue or emergency you must legally address. Those triggers aren’t relevant with financial advisors. They provide services more in line with maintenance and strategy. In that way, they’re more likely to form a business relationship with their clients.

Still, the financial advising industry is somewhat more mysterious than the legal profession. It’s not always apparent what kind of factors and details go into the act of deciding what financial advisor you’d like to work with. Fortunately, there are just a few analytical steps and thoughts you need to consider.

Here are three tips on how to approach your decision on what financial advisor will work best with you.

Determine Your Financial Status and What You Need Help With

Before you start combing through lists of local financial advisors, you need to dial down on your current financial profile. Most advisors are specialized in certain areas of financial management. It’s important to know if their areas of expertise match your needs. So the first thing to do is figure out what those needs are.

This can be a two-step process. The first step is knowing the state of your finances. That goes beyond what’s on your bank account balance sheets. It includes credit status, real estate holdings, stocks and investments, tax status — anything that has an ongoing and significant impact on your finances.

The second step is determining your financial goals and what you need the advisor’s help on the most. Are you just looking to maintain your financial profile to keep it secure? Or are you looking to generate more income for a major purchase down the road?

Whatever your situation, a financial advisor can help you draw up budgets, make estate plans, consult on taxes, or even refine your long-term goals. Make sure you’re clear on what you’ll rely on the advisor for the most.

Know the Variations Between Different Kinds of Financial Advisors

Just as investors have differing situations and needs, financial advisors offer different services in various areas of expertise. Some offer investment consultation or coaching. Others act as brokers or portfolio managers. And a few even work with very specific industries or types of investors.

Certification is a very important aspect of being a financial advisor. Some are licensed fiduciaries who are legally required to focus on the needs of their clients, not their own benefit. Fiduciaries are fee-oriented and are not paid through commissions on your transactions. This protects their clients from undue risk.

Similarly, investment advisers must also be certified by the government. Depending on where they do business, this certification comes from either state agencies or the U.S. Securities and Exchange Commission. They may not have the same stringent requirements of a fiduciary, but they are subject to regulation.

Try to learn about the financial advisory landscape in general. Compare the different levels of services offered and which one is a match for your needs.

Figure How Much You Can Afford to Pay — and How You Want to Pay It

Since you’re dealing with your personal finances, you’re the one most qualified to know how much you can afford to pay a financial advisor for their services. 

When you’re reviewing your financial situation in the first step in this article, calculate how much you can spend on an advisor. There’s no right and wrong answer — it’s likely that whatever your budget, you’ll be able to find an advisor who will take you on.

Consider how a potential financial advisor earns their income. Fiduciaries are fee-based services that don’t charge transaction costs. Other investment advisers may work on commission off your transactions in addition to administrative expenses. 

You may also come across some who charge retainer fees or a percentage of your portfolio performance. Still others have a “hybrid” cost basis that covers a few fee structures.

Be honest and direct about what you can afford and the expenses you’ll be paying for.

Make the Smart Choice With Good Life

Good Life is squarely focused on our clients’ needs and different situations. We tailor our services to address your financial profile and investment goals. We offer honest, direct advice and develop strategies for financial success. 

We’ve helped many clients and businesses craft financial plans that have brought profitability and security to their investment portfolios.

We’d like to help you with your financial goals and are happy to tell you more. When you’re ready to move forward, contact us for a risk-free consultation.