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Don’t Make These Mistakes When Hiring a Financial Advisor

When it Comes to Your Hard-Earned Money, It’s Crucial to Find the Right Advisor for You

Hiring a financial advisor can be the best way to develop a strong financial plan and achieve your long-term financial and life goals. Too often, however, people hesitate to seek out the assistance of a professional when it comes to helping them manage their finances – even if they’re struggling. In fact, research on the subject shows that even though 71% of adults need improvement with their financial planning, only 29% take the step of hiring a financial advisor. Some are too nervous to put their money in someone else’s hands or simply don’t feel that an advisor would be beneficial, yet research suggests those who work with a financial advisor have significantly more money for retirement than those who don’t.

So, how do you take this critical step and choose the advisor who is right for you? With something as important as your hard-earned money, you’ve got to find someone you can fully trust. As you consider hiring a financial advisor, keep these common mistakes in mind to avoid them as you begin your process.

Not checking to see if the advisor is a fiduciary.

Unfortunately, there’s no federal law that regulates who can call themselves a financial advisor, so while many people may call themselves financial advisors, not all of them will have your best interest at heart. It’s important that, as you look for an advisor to hire, you find one who is bound by fiduciary duty. Fiduciary advisors are, by definition, ethically bound to act in their client’s best interests. They are required to disclose any potential conflicts of interest and they do not receive commissions for selling particular financial products.

Hiring an advisor without checking out the competition.

It may be tempting to hire the first advisor you meet or the one with an office closest to you, but you should dig a little deeper. Picking the right advisor is going to take time – you want to make sure that you do your research, talk with several different advisors, and investigate their references so that you can be sure you’re choosing the right advisor for you. Treat it like an interview process and ask questions. Any advisors who cannot answer to your satisfaction or who dodge questions should be removed from consideration.

Choosing an advisor with the wrong specialty.

Many financial advisors specialize in a specific area of wealth management. Some focus on small business finance, others may work mostly with those who have a high net worth, others specialize in retirement planning or investment management, and so on. As you’re hiring a financial advisor and conducting interviews, take the time to understand an advisor’s strengths and weaknesses to ensure that they’re the right fit for your specific needs.

Hiring an advisor with an incongruent investment strategy.

Each advisor is going to have their own approach and strategy when it comes to how they think you should invest your money for your future. Some advisors may take a more conservative approach, whereas others may suggest more aggressive investments. It’s important that you learn what strategy your advisor is most likely to take so that you can be sure it’s in line with your wishes and risk tolerance.

Forgetting to ask about their credentials.

All financial advisors are required to pass a test and obtain specific certifications before they’re able to provide financial advice. As you’re interviewing advisors, be sure to inquire into any licenses, tests, and credentials they may or may not have. On top of the minimum certifications, some advisors go even further and become  Certified Financial Planners (CFP), meaning they have demonstrated competency in all areas of financial planning. You can also check an advisor’s credentials on your own through FINRA’s BrokerCheck tool.

Hiring an advisor without understanding their fee structure.

There are a few different ways that an advisor can make money. Some advisors are “fee-only” and they charge a flat rate for their services, no matter what. Others make money on each trade they execute, so whenever they buy or sell shares on your behalf, there is a fee added to the trade amount. They can also earn a commission on any products that they sell. If the advisor will be able to earn more money by ignoring your best interests, then you’ll want to think twice before hiring them.

Concluding Thoughts on Hiring a Financial Advisor

Finding the right advisor for you will ultimately depend on what exactly you need from your advisor. Financial planning is different for everyone, and it changes based on who you are, your goals, what you value, and your relationship with money, so it may take some searching before you find an advisor who fits with your needs. Take the time to do your due diligence because this decision can greatly impact your future. The advisor you pick should help you build a financial plan that accurately reflects your goals, your values, and the legacy you want to leave when you’re gone.

At Paces Ferry Wealth Advisors, we offer a calculated, comprehensive approach to financial planning that is designed specifically for your unique situation and goals. If you’d like to start a conversation to see if one of our financial advisors is right for you, please contact us today.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.


Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.