Here is a question I’ve gotten several times over the years from members of the Girl$ on The Money community:
How do you feel about financial advisors? Do you recommend getting one? What should I look for when picking an advisor?
And here are my two cents:
While I 100% respect the financial advisor industry and believe there are great people out there doing that job, I am personally not a big fan of ‘blindly’ handing over my hard-earned money to anyone and having them manage it for me.
Time and experience have taught me that we all can learn how to make intelligent investment decisions and manage our own money. It is a skill like any other that gets better and better with time and experience.
Financial advisors can be costly, and how they get paid can depend on whom you hire. The advisor might take a percentage of your overall assets yearly (regardless of how your investments perform). Or, they might get paid via commission based on investments they tell you to buy.
With that said, I understand that some people out there may feel they have overly complex financial situations and might feel like hiring a financial advisor is the only way they can get peace of mind.
Others might need help creating a will or other financial plans and feel they could potentially benefit from an expert in those areas.
In those cases, I would recommend doing the following:
- #1. Before you officially hire anyone – Interview at least three different advisors! Come up with a list of potentials and then get to work. You can get some ideas via word of mouth (ask your friends if they are working with one). You can also use a nonprofit database like the National Association for Financial Advisors to find people in your area. Side note: I would not recommend just taking a random recommendation and going with it. Even if it’s a close friend or family member. Remember Bernie Madoff? His clients were mostly gathered via word of mouth and he turned out to be a huge fraud. Be careful!
- #2 Confirm that the advisors you are talking to are Fiduciary. A fiduciary means the advisor is legally required to always act in your best interest. Their recommendations should be tailored to you and your financial situation (not to benefit their pockets).
- #3. During the interview, ask how they get paid and whether they get a commission from the products they talk to you about
- #4 Ask them these kinds of questions: “If I were your relative or close family member, would you be giving the same advice?”
- #5 Ask them how they invest their own money!
This is by no means an ‘exhaustive’ list of things to ask. Just throwing out some ideas on questions I consider important.
I cannot emphasize this enough: You must understand fee structures and how much you’ll get charged for services if the money is not already being deducted from your overall assets.
An idea I REALLY like (and would personally prefer) is to hire an advisor for a one-time fee to help you draft a plan based on your specific needs. I am not a fan of paying an ongoing monthly fee or a percentage of my assets if I am not actively using the advisor. Just my personal opinion!
Hiring a financial advisor should be similar to hiring a therapist. You want to feel comfortable with that person and ensure they have YOUR best interest at heart. Compare and “shop around.”
At the end of the day, if you decide to hire someone, I think it is still wise to understand how investing works so that you at least have an idea of how your money is being managed.
We work hard for our money and want it to work hard for us without spending a fortune or unnecessary fees in the process!
Questions? Comments? Let me know below.
Cheers to health and profits!
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