Finding the Right Financial Advisor

Justin Goodhue |

Finding the right financial advisor can be a challenging task. How can you be certain that this person or firm is the right choice? Managing your financial future is a significant responsibility, so it's essential to explore your options thoroughly. Look below to gain insight on whether you should stick with your current advisor or look for a new one to handle your investments.

Among the most discussed elements of financial guidance are the associated costs. Financial Advisors generate income through various methods, including commissions, advisor fees, 12b-1 fees, and the list goes on. Have an open conversation with your current advisor about he or she is being compensated; if clarity is lacking, it may be time to explore other options.

Different forms of financial advice are bound by distinct legal statuses. The best of ethical standards is a fiduciary duty, in which an advisor is legally obligated to prioritize the clients and act in their best interests. Honesty and transparency are the hallmarks of this advisor-client relationship. Notably, financial advisors and consultants affiliated with large financial institutions and broker-dealers often lack a fiduciary duty to their clients, potentially leading to conflicts of interest.

Selecting the right advisor is very important to your financial success, but ask yourself a few questions: Why are you investing in the first place? To build wealth? To protect wealth? To plan for retirement? To protect your assets against inflation? Is your portfolio worth $25,000 or $25 million? Do you require expert tax guidance? The complexity of your financial situation may dictate the level of advice necessary from your advisor. Additionally, remember that you need not rely solely on one individual; if doubts about your current advisor arise, don't hesitate to seek a second opinion from another financial professional. Here are a few questions to ask:

  • Will you communicate regularly with me?

  • Who are your clients?

  • Will my investment portfolio be customized to reflect my specific needs, objectives, time horizon, and risk tolerance?

  • Is your compensation commission-based or fee-only?

  • How will you manage my portfolio?

  • Do you choose investment products yourself?

  • Do you primarily use mutual funds, ETFs, or individual stocks when you choose equities?

  • Are your fee structures transparent?

  • Will you schedule a fixed number of meetings annually, or can I contact you to arrange meetings as needed?

  • Do you offer virtual meetings?

Ultimately, one of the most important aspects of choosing the right financial advisor is simply to choose someone with whom you feel comfortable and trust to always prioritize your best interests.