Choosing the right financial advisor is vitally important to your financial well-being. This is someone you will trust with your money, which makes it a high-stakes decision. After all, your wealth wasn’t built overnight and deserves good stewardship.
Finding a trusted financial advisor and capable wealth management firm is a process that deserves your time and attention. Here are five checkpoints to take into consideration when choosing a financial advisor:
1. Get a second opinion.
One mistake people make over and over again is going with the first option they are presented with.
If you were diagnosed with a severe illness requiring major medical treatment, chances are you would see two, three — maybe even four — doctors so that you could learn as much as possible about the condition and the treatment options available to you.
Your financial health should be no different.
Don’t make the mistake of jumping at the first advisor you’ve ever met.
2. Take internet research with a grain of salt.
The best thing about the internet is also the worst thing about the internet. If you look for something, you will find it, whether it’s wrong, right, or somewhere in the middle.
While proactive research is a great way to educate yourself and assist you in making a good decision, it can also have the opposite effect. A great deal of financial information online is opinion-based, just like the article you are reading here. That being said, a competent fiduciary advisor will have your best interest as their main priority, meaning that you can spare yourself the endless hours of back pain-inducing computer research.
3. Beware of bias.
Whether or not you want to hear it, insurance is a financial tool.
There is a rampant bias toward insurance products, fueled primarily by marketing gimmicks. Like any other products sold by a company, some are better than others. Remember this simple phrase: Purpose determines placement. Everyone’s situation is different, and insurance can serve an excellent purpose for the right individual in the right situation. When you buy an appliance, it’s purchased for a specific reason. A dishwasher washes dishes. Life insurance is needed in the event someone dies unexpectedly; annuities can guarantee income.
Know the purpose of each financial decision you make. An ethical advisor will be able to show you exactly what each recommendation is for.
4. Is the advisor a fiduciary?
Fiduciary has become a buzzword in the financial services industry. Many consumer advocates are telling the public to work with a fee-based advisor and make certain they are a fiduciary. A fiduciary works for you, not another company. This means that their decision-making process is for your benefit. If someone works for a company and is not a fiduciary, then they have the company’s best interest in mind.
5. Ask the hard questions.
No topic should be off-limits with your advisor. If there is something you would like to know, you have a right to that answer. Get the answers you need to feel comfortable. Whether related to fees, experience, or other areas of concern, you have the right to gather the information you need to make an informed decision that you’re content with.
Like most decisions in life, it’s best to make choices about your retirement with a calm and level head. Talk over your options with your spouse and loved ones. Take your time, trust your gut, and, most importantly, don’t be afraid to ask questions. Like many things in life, it will require some work and even discomfort. Once it’s all over, though, you’ll be grateful that you did it.