How to Pick the Best Financial Advisor for You
Finding the right financial advisor is a daunting task. It may initially seem overwhelming with so many options and the complexity of navigating the various services, credentials, and fees involved in finding a good match for your needs.
However, with some guidance, you can make informed decisions tailored to your situation and goals.
Types of financial advisors to consider
- Fee-only financial advisors are independent professionals who provide advice solely on a fee basis. They do not accept third-party commissions or fees for selling products or services to their clients. These advisors focus on executing specific types of investing and general wealth management. Some even provide more comprehensive “total balance sheet” strategies beyond investments and planning.
- Investment brokers provide services related to investments and are typically paid on commission. In some cases, this could negatively affect their advice because of conflicts of interest. Ask about their compensation structure before making any decisions.
- Robo-advisors are automated systems that use algorithms to manage investments based on specific criteria provided by the user. They generally charge lower fees than human financial advisors but may lack personalized guidance.
Deciding which financial advisor is suitable for you
Once you understand the different types of advisors, decide which is right for you. Consider the following:
- Your goals
Think carefully about your short- and long-term financial goals — like education, retirement, tax planning, navigating stock options, and estate planning. Knowing what issues are important to you now and what support you may need in the future will help you focus on the requisite areas of expertise of an advisor to work with.
- Services, credentials, and experience
Ensure their service capabilities match your goals— and remember that needs shift over time. Work with a firm with the necessary resources to help adapt to your changing needs and complexities.
Credentials and experience matter. Ensure you are working with someone committed to mastering a relevant body of knowledge and consistently pursuing ongoing education in the field. A Certified Financial Planner (CFP) certification confirms an advisor’s extensive experience leading clients through different types of markets.
Consider whether an individual or small team is sufficient for your needs or would be better served by a larger organization with an in-house team of experts to handle the complexity of your financial, legal, and tax issues.
- Investment philosophy and portfolio management approach
Historically, investment management has been the primary service financial advisors provide. Understand, and be comfortable with, their investment philosophy and how it informs their approach to portfolio management. If they can articulate their philosophy succinctly, keep listening; if not, consider walking away.
- Fiduciary vs. Suitability Standard
Financial advisors generally operate under one of two standards of client care.
A fiduciary is a person or organization legally bound to act solely in the best interests of their clients. The suitability standard requires advisors to recommend investments/products that are appropriate for the client, but they are not required to act in the client’s best interests.
A fiduciary advisor has a designation as a certified financial professional (CFP) or chartered financial analyst (CFA).
- Fees and Compensation
Advisors work for different types of compensation. Some receive commissions for products clients invest in; others are fee-based, charging fees for services and receiving product commissions; finally, some are fee-only, with several different fee compensation models. It is essential to fully understand how the advisor is paid and the value you will receive for those fees.
- Personality Fit
Money is an emotional topic — it can be hard to take advice from someone you don’t “connect” with, especially regarding critical decisions. Choose someone you feel comfortable opening up to and discussing your fears, goals, and values with.
Choosing the right financial advisor does not have to be overwhelming.
If you take your time, research, and ask plenty of questions, you will have the facts to make the best decisions for your situation.
Consider the types of financial advisors available, thoroughly review their credentials & services, understand their fees & compensation structure, and evaluate how they will help you meet your goals & objectives. Once you have all these pieces, you can confidently choose a financial advisor.
If you’re facing a specific financial challenge and need some advice, reach out to the Brighton Jones team! Over the past twenty years, we’ve successfully helped clients navigate thousands of journeys. We would be happy to help you craft a successful one, too.