“How Do I Choose a Financial Advisor?”
Written By: Andrea Bulen, CFP®
In our previous blog, “Why Do I Need a Financial Advisor?”, we answered questions we often hear regarding why someone would hire a financial advisor. Now, we’d like to help you better understand the financial industry so you can decide which advisor might be the best fit for your family.
After you’ve narrowed down a list of potential advisors, consider the following key points:
Understand What It Feels Like to Be a Client – Will It Meet Your Expectations?
The client experience varies from one advisor to another, so ask specific questions to ensure the services align with your needs:
Services Provided: What exactly will the advisor do for you? Ask them to get specific. For example, many advisors describe they provide retirement income planning, but how is that delivered? Have them give real examples of ways they’ve helped newly retired clients.
Coordination with Other Professionals: Will they coordinate with your tax and insurance advisors or your attorney? Describe how they will work together for your benefit.
Meeting Frequency and Agenda: How often will you meet and what will the agenda be? Will they focus solely on investment performance or will you cover a wide range of relevant financial planning topics?
Additional Resources: As a client, will you have access to educational or community events?
Accessibility: How accessible is the advisor and their team? Do they only meet certain times of the year? Are meetings offered both in person and virtually? Do they have a policy of returning phone calls and emails promptly? Who will get back to you if you have questions – the advisor directly or someone from their team?
Know How Your Advisor Gets Paid
Understanding an advisor’s compensation model is essential in evaluating whether they’ll act in your best interest. Here are the common ways financial advisors are paid:
Fee-Only: Paid a set fee – either hourly, as a percentage of assets under management or an annual flat rate. They do not earn commissions from the sale of financial products.
Commission-Based: These advisors earn commissions from the financial products they sell like insurance or mutual funds. Are you confident the advisor will always be working in your best interest?
Fee-Based: This is a combination of both fee-only and commission-based compensation. Make sure the fee structure is transparent and you know exactly what you’re paying for each service.
Assess the Advisor’s Fiduciary Status
Is the advisor a fiduciary? A fiduciary is legally required to act in your best interest, unlike some advisors who may only need to recommend “suitable” products. Not all advisors have this obligation. Confirm the advisor you are interviewing adheres to this higher standard of care.
Review Designations, Education and Experience
Ask about the advisor’s educational background and the designations they hold. Ensure their qualifications match the guidance you are seeking. Do their designations and credentials require ongoing education and have a board of standards advisors have to answer to?
Certifications such as Certified Financial Planner™ (CFP®) or Chartered Financial Analyst® (CFA®) often require ongoing education and adherence to professional standards.
Consider the Succession Plan – Know the Team
Is your advisor a solo practitioner? If so, what happens if they are not reachable or have to leave the workforce abruptly? Ask about their contingency plans.
If they have a team, ask what plans they have for the future. What happens to the team members as your advisor approaches retirement? You want to ensure continuity in the advice you receive and who will be there for you long-term.
Mosty Importantly – Relationship and Trust
A relationship with a financial advisor should be ongoing, not just transactional. It’s crucial you feel comfortable discussing your financial goals and concerns.
Above all, do you trust your advisor? Trust in their background, expertise and overall commitment to act in your best interest should be the foundation of your decision.
By considering these factors, you’ll be better prepared to select a financial advisor who aligns with your family’s values and goals. At Shakespeare Wealth Management, we are a Fee-Only, Fiduciary firm committed to always acting in your best interest. We’re here to answer your questions, provide clarity on the advisory process and help you find the right fit for your family. Our goal is to help you move forward with confidence and peace of mind.