Are you thinking of hiring a financial advisor to help you with your money? Full disclosure, I’m not, obviously, because I am one.


I’ll tell you this, though… Coming from someone who’s been in this industry for over a decade, if I was looking to hire a financial advisor there are a few questions I would need to have answered in order to feel comfortable about trusting one with my hard earned money especially since there can be risk involved in investing.

Any way you slice it, the idea of moving your life savings from one financial advisor to another, or the idea of trusting someone and working with someone to help you build your nest egg is a major decision that should not be taken lightly.

Taking the wrong type of advice to heart or making certain types of mistakes could end up costing you a lot of money over the course of your saving and investing career.

I want to help you avoid doing that.

Let’s pretend (just for a few minutes) that I’m looking to hire a financial advisor, I’ll tell you exactly what I’d be looking for if I was…

First things first, only work with someone you feel good about being connected with and working with.

I always say this is kind of a no-brainer. If you’re looking to feel good about the direction your money is moving and what choices you make, it’s important that you have a solid working relationship with your advisor.Financial Shake

The connection I’m referring to is made up of a few elements…

Trust: I think it’s important to most people to feel like your advisor is working in your best interests and being honest with you. You want to know that if you ask a question it’ll get answered and that if you have a concern it’ll be resolved.
After all, you’re trusting your future with someone and you should make sure you feel like they’re worthy of that kind of responsibility.

Communication: Whoever you decide to hire to work with your money, I would definitely make sure you feel comfortable communicating with them.
I always say it’s a good idea to discuss your expectations with a potential advisor up front. If you want to speak to them weekly, tell them. If you only want to hear from them once a year, tell them.
If you normally get nervous and feel offended when you don’t get a voicemail or email returned by your advisor within 24 hours, let them know up front. If you can come to an understanding about the best way to communicate up-front, it could save you a lot of frustration over the long-term.

Respect: This one kind of goes hand in hand with trust, but you have to respect the ideology of your financial advisor.
On the same token, your advisor better be in a position where they respect your ideas and the expectations you have for your money.

It’s not a REQUIREMENT that you love your advisor (I hope you do), but if you can’t stand sitting in the same room with them or you feel like you have to second-guess their knowledge (or lack thereof) this could turn into a bigger issue later than it is now.

Working with a financial professionalthat you don’t have a mutual understanding of respect with is a slippery slope that can breed resentment and a lack of communication when it comes to your money.

Ask Them if They’re a Fiduciary

Fiduciary: Being legally and ethically bound to act in another’s best interests.

You may not know this, but not all financial advisors are legally required to work in your best interests when it comes to managing your money, offering you financial products, or creating financial plans for you.

One would think that when it comes to working with your money all advisors would do what’s best for their clients 100% of the time but that’s simply not the case with all financial advisors. In fact, you may be surprised to know that there are a lot fewer advisors truly acting as a fiduciary for their clients that those who actually ARE acting in this capacity for their clients.

Recently, the Department of Labor has passed (and is in the process of passing) the Fiduciary Rule into effect. This is a piece of legislation meant to keep consumers in the know when it comes to who’s really working with their money and to disclose and highlight the different conflicts of interest that may be taking place with some types of financial professionals.

Now, any financial professional who works with your IRAs, 401(k)s or any other qualified retirement account is considered to be a fiduciary. Unfortunately, this same level of care is not required for money other than these qualified retirement accounts, unless you’re working with an advisor who maintains the fiduciary standard of care at all times.

Not to get into TOO much detail here, but I think this is BIG for the industry.

Prior to the passing of the rule, a lot of financial professionals have worked for their clients on what we call a “suitability standard”. This means they are only held by the standard to what is “suitable” for their client’s financial situation.

This means that they can offer you products and recommendations that may be “suitable” for you. This is OK, but things like commissions paid to brokers, fees charged by financial institutions for managing money and also incentives that certain companies provide to brokers and advisors may not need to be spelled out and compared across products in plain English for you so you can truly decide what makes the most sense for you.

Transparency: Clear, easy to see through, not containing anything that would obstruct your view.

I believe advisors should have a transparent and open platform for their clients. This means that they should disclose all fees, commissions, and conflicts of interest with their clients up front prior to doing business with them, collections fees from them, and receiving commissions from them as well.

I also believe advisors should ALWAYS be held to the Fiduciary standard, not just when dealing with qualified retirement accounts like IRAs and 401(k)s.

If I were looking to hire a financial advisor, knowing what I know now (and what I’ve seen in the 10+ years I’ve been helping people plan with their money), I would seek one out that’s been acting as a fiduciary for their clients for the majority or all of their career, not someone who is scrambling to adjust to the changes in the industry as they happen. I would be looking for an advisor with a track record of doing what’s best for clients because of who they are, not because of new rules that force them to change.

Are you thinking of interviewing a potential advisor? Ask them what they think about the new law, and ask them how long they’ve been officially acting as a fiduciary for their clients.

If your prospective financial advisor seems confused by any of those types of questions, just ask to see their form ADV 2 brochure– that’s a document that investment advisors are required to give to their clients if they solicit business from them, get your hands on that document and read for yourself.

If your advisor doesn’t have an ADV 2 brochure then they most likely work for an insurance company or a broker-dealer and may not even be a real financial advisor (they could be what’s called a Registered Representative or just a life insurance agent). I’m not saying that’s a bad thing, but I would personally feel safer working with someone that was required to tell me everything about their business in writing before we did business.

Figure out if you’re potentially working with a broker-type advisor or a planning-type advisor

There are a few different types of financial advisors out there.

A broker-type advisor is mostly focused on selling and managing investments or other financial products for their clients for their clients.

A planning-type advisor focuses on putting together financial plans for their clients by running the numbers and doing the math to achieve specific financial goals like having a certain amount of income in retirement or helping you prioritize when to make certain financial decisions.

If you can find an advisor that offers brokerage services and also financial planning, you may get a more holistic approach to your money by doing that if it’s important to you.

It pays to have a plan (about getting a plan)

This is a big decision. Take your time when you interview an advisor, make sure you feel comfortable with who you’re working with. Understand that there is no “perfect” advisor out there, but taking the time to find and work with a financial professional that you feel good about working with can definitely pay you dividends in peace of mind throughout your lifetime.

Good Planning, Good Saving, and Good Investing!

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