Hiring a financial advisor is a remarkable decision. It offers a clear indication that individuals are prepared to make smart decisions about their financial planning to reach the next level. According to Scott Tominaga, working with a financial advisor can be immensely helpful in deciding and adopting great financial strategies in the approaching years enabling individuals to reach their life goals efficiently. Considering the gravity of the decision involving financial matters, due diligence is a must before hiring a professional. The article aims to focus on 6 mistakes that people make commonly while opting for a financial advisor.
- Hiring a Non-Fiduciary Financial Advisor
When considering hiring a financial advisor, it is vital to remember that not all standards of financial advisors are equal. With varying standards, it is always recommended to work with a professional who adheres to fiduciary standards. Precisely, a fiduciary financial advisor is legally obligated to act considering the best interest of their clients which does not apply to non-fiduciaries. So, while working with a fiduciary financial advisor, people don’t have to be worried about conflicts of interest while relying on the advisor to follow their investment and wealth management strategies. This also clarifies that the advisor will never suggest to invest any financial product against which they will be paid a commission. To avoid making such a mistake, ask whether the professional is a fiduciary or not. It also makes sense to verify if they are certified by governing bodies like the Securities and Exchange Commission.
- Choosing a Financial Advisor Abruptly Without Any Research
Before hiring a financial advisor, one needs to research well about the track record and interview at least three professionals before choosing one, recommends Scott Tominaga. After all, when individuals depend on professionals to guide them in building their investment portfolio and wealth, hiring the first professional they meet is a major mistake. Make sure to conduct thorough web research, check the background of professionals, get quotes, and compare, get their clientele, and cross-check with them to know about their experiences with the standard and reliability of the professional before hiring one.
- Not Verifying Credentials and Qualifications
Make sure that the financial planner is equipped with relevant certifications, like Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA), or hold accredited designations. Do not hesitate to check their credentials as well as affiliations with professional establishments to ensure they conform, to the industry codes, standards, and ethical practices.
- Not Asking About Fee Structure
Financial advisors and planners are typically compensated in two distinct ways, the first one is by charging fee-only or flat-free from their clients. They get paid at a pre-set rate for their services, while others are compensated by commission on the financial products they promote. Make sure to work with a fee-only financial advisor and be wary about those who earn commission considering they might have conflicts of interest because of the commission-based scope of earnings. So, ask clearly about their upfront fee structure, ensuring they recommend only products looking at the best interest of their clients.
By avoiding these common mistakes, individuals can ensure hiring a financial planner who prioritizes clients’ best interests and recommends products aligning with their financial goals. Check credentials, conduct due diligence before hiring the professional, and ensure building a solid financial future.
