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5 Questions to Ask When Choosing a Financial Advisor

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Whether you’re saving for retirement, considering major purchases, planning your estate or just want a second set of eyes on your investments, hiring a financial advisor who best suits your needs could be key.

About 62% of U.S. adults admit their financial planning needs improvement. However, only 35% of Americans work with a financial advisor, according to a recent study.

The value of working with a financial advisor varies by person. While advisors are legally prohibited from promising returns, research suggests that people who work with a financial advisor feel more at ease about their finances and could potentially end up with about 15% more money to spend in retirement.1

Finding a fiduciary shouldn’t be that hard. Thankfully, it isn’t. SmartAsset’s no-cost tool can help you find vetted financial advisors who serve your area.

How does the free tool work? Click here to take our quick retirement quiz and get matched with up to three financial advisors in just a few minutes, each obligated to work in your best interest.

Whatever your reasons for seeking financial advice, getting these five answers upfront can help you find the best-qualified fiduciary for you.

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5 Questions to Ask When Choosing a Financial Advisor

1. Are You a Fiduciary?

Fiduciaries are financial advisors with a legal obligation to prioritize your interests as they manage your assets or money.

Unlike a broker who may push you into insurance policies or investments to rack up fees and commissions, fiduciaries are bound to recommend options that benefit you, the customer. While conflicts of interest can still exist, any potential conflicts of interest must be disclosed.

Our free tool will only match you with vetted fiduciary advisors.

2. How Much Experience Do You Have?

In addition to asking about their professional certification, it can also be a good idea to ask a prospective financial advisor about their overall experience.

Generally, the more experience they have the better, especially if your financial situation is complicated. You should consider asking about their education, previous employers and track record of success.

You might also want to consider performing a background check to find out whether they’ve ever been convicted of a crime or been involved in a criminal investigation by a regulatory or trade group.

Don’t be afraid to ask for references from current or previous clients, and be wary of a financial advisor who seems reluctant to provide this information.

3. What Type of Services Do You Offer?

Some financial advisors offer a range of services, while others specialize in niche aspects of financial management.

For example, some advisors may only handle investments, while others take a more comprehensive approach, including retirement, estate planning and tax planning, along with other services. Ideally, you should look for an advisor whose range of services most closely fit your current and future needs.

It’s also helpful to ask whether they specialize in a specific type of client. Some financial advisors may cater to retirees while others may prefer to work with families or divorcees. Some advisors cater to high-net-worth clients.

Choosing an advisor who works exclusively with clients whose situations are like yours means they could be better equipped to offer the type of guidance and advice you may be seeking.

4. What’s Your Fee Structure?

Before you sign on the dotted line, you need to know how much your prospective financial planner will charge for their services.

Depending on the type of professional you’re working with, they may receive a flat or hourly fee, be paid on commissions, or a combination of both. Fee-based advisers, for example, charge an up-front fee, but may also get a commission for selling financial products.

Fee-only advisors make money from the fees they charge their clients. Some fee-only advisors charge a flat rate while others charge by the hour. Advisors who cater to high-net-worth clients may calculate their fees based on a percentage of the assets under management.

5. What’s Your Investment Approach?

You should also consider asking prospective advisors about their investing approach.

If you’re not comfortable taking on a lot of risk, you could consider a financial advisor who advocates a more conservative strategy. Knowing whether or not their investment style matches your personal investing philosophy beforehand could potentially save you complications in the long run.

How to Find a Vetted Fiduciary Financial Advisor

This is the biggest hurdle for many. With thousands of daily Google searches for “Fiduciary financial advisors near me,” “best fiduciary financial advisor,” and “financial investment advisors near me,” the hunt for a vetted fiduciary advisor can feel like a wild goose chase. But it doesn’t have to be. Our free matching quiz links Americans with up to three fiduciary financial advisors who serve their area so they can evaluate and choose the one who fits their needs.

SmartAsset has matched thousands of people with financial advisors. Advisors are rigorously vetted through our proprietary due diligence process. We only match with fiduciaries, so all your financial advisor matches are legally committed to acting in your best interest.

Our advisor matching service is at no cost to you and there is no obligation to work with any of your advisor matches. You’re in control.

Get your fiduciary advisor matches today.

Sources:

1. “Journal of Retirement Study Winter” (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.

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One Thought on “5 Questions to Ask When Choosing a Financial Advisor

  1. Question #6 If you are such a good financial advisor why are you a financial advisor and not a beneficiary of you own knowledge and rich?
    Note: Index funds which charge you a fraction of what an advisor charges beat 80% of all advisors.

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