You might think you have what it takes to navigate the financial world on your own. But if you’re working with a limited budget and want to make the most of your money, finding a financial advisor can make all the difference. A good advisor not only helps you stretch your dollars further but can also help you where you want to be financially.
Keen to pay off your debts quickly? Thinking about investing in real estate or taking your business to the next level? A financial advisor can develop a personalized game plan to ensure that your goals are met.
In this article, we go over everything you need to know about finding the right financial advisor for your needs.
What is a Financial Advisor?
In reality, there is no such thing as a “financial advisor.” Anyone can call themselves a financial advisor without any sort of professional certification. That said, there are several certifications that financial advisors can pursue, such as:
- Chartered Financial Analyst (CFA)
- Certified Financial Planner (CFP)
- Registered Investment Advisor (RIA)
Each of these credentials has different requirements, but generally speaking, they all involve completing an exam as well as meeting certain work experience requirements. Note that these credentials do not guarantee that an advisor is competent or ethical, but they do show that the advisor has met certain standards.
What Services Does a Financial Advisor Provide?
Financial advisors offer a wide range of services, from helping you invest your money to ensuring that your first home purchase is within your budget.
For example, if you’re mostly concerned with saving for retirement, you might want to work with a financial planner. If you’re self-employed and need help managing your taxes, on the other hand, you might be better off working with an accountant who specializes in tax law.
A few common services provided by financial advisors include:
- Investment management
- Tax preparation and planning
- Retirement planning
- Estate planning
- Insurance planning
- Budgeting and cash flow analysis
- Debt management
Some advisors may specialize in one or two of these areas, while others may be more generalists. As you’re searching for an advisor, it’s important to keep in mind the specific services you’re looking for.
How Much Does a Financial Advisor Cost?
Financial advisors are paid in one of three ways: commissions, fees, or a combination of the two.
Simply put, fee-only advisors are paid only by the fees they charge their clients. This arrangement aligns the advisor’s interests with those of the client, as the advisor only makes money if the client is happy with the service. Commission-based advisors, on the other hand, earn a commission on the products they sell. This type of advisor may be more likely to push certain products, even if they’re not in the best interests of the client.
As a general rule, fee-only advisors are a better option than commission-based advisors, especially if you’re working with a limited budget.
How to Find the Right Financial Advisor for You
Now that you know what to look for in a financial advisor, it’s time to start your search. Here are a few tips to help you find the right advisor for your needs:
Lay out your financial goals
The clearer you are about your financial goals, the easier it will be to find an advisor who can help you achieve them. Make a list of your short-term and long-term goals, as well as any questions you have about your finances. This will give you a good starting point for your search.
Do your due diligence
As we touched on previously, any random person on the street can call themselves a financial advisor. Make sure to check an advisor’s credentials and background before working with them. Google is an easy way to start your research, but you can also check with the Better Business Bureau or your local Chamber of Commerce.
Get referrals from trusted sources
If you have family or friends who have worked with a financial advisor, ask them for referrals. Bonus points if they are also working toward similar financial goals as you.
Choose someone you’re comfortable with
A good way to think about financial advisors is that they’re similar to personal trainers. Going with the “best” option isn’t always a slam dunk.
Fit matters just as much as skill or competence. A financial advisor to the stars, for example, isn’t going to be a good fit for someone who’s just starting out and only has a few thousand dollars to their name.
All things being equal, it’s better to go with an advisor you feel comfortable with. This will make it more likely that you’ll be honest about your finances, which is an important part of the advisor-client relationship, as well as follow their advice.
Shop around
Searching for the perfect financial advisor can be tiresome. But your decision here will have lasting implications, so it’s worth taking the time to find someone who’s a good fit.
Once you’ve found a few potential advisors, set up consultations with each of them. This will allow you to see how they operate and whether or not you feel comfortable working with them.
Be on the lookout for any red flags as you’re meeting with potential advisors. These can include aggressive sales tactics, grandiose promises, or a general feeling that something isn’t quite right. If you see any of these red flags, move on to the next advisor on your list.
Hiring a financial advisor is the first step on the road to financial freedom. Don’t let the process intimidate you—a little bit of research and due diligence will go a long way.
Remember to keep your goals in mind as you’re searching for an advisor, and don’t be afraid to shop around until you find someone you’re comfortable with. With the right financial advisor by your side, you’ll be well on your way to achieving your financial goals.
