Navigating your personal finances can feel like learning a new language. Whether you’re trying to figure out how to invest your savings, plan for retirement, or build a financial strategy that works for your life, the idea of hiring a financial advisor has probably crossed your mind.
But before you dive in, there are a few things to consider. Hiring your first financial advisor is a big decision—one that can have long-lasting effects on your financial future. Let’s break down what you need to know before taking the leap.
Why Do You Even Want a Financial Advisor?
Before you start looking for someone to manage your money, ask yourself why you need a financial advisor in the first place. Are you looking for someone to help you with long-term retirement planning, or do you just need guidance on investments? Maybe you’ve come into some extra cash and want to make smart decisions on how to grow it. Whatever the reason, having a clear picture of your financial goals will make the process smoother and help you find the right fit.
Think about it this way: a financial advisor is like your money coach. If you’re not sure what you’re trying to achieve, it’ll be harder for them to give you the right game plan. Be honest with yourself about where you stand financially and what you want help with. This way, you can avoid hiring someone for tasks you don’t really need and focus on areas where you could really use a hand.
Fiduciary vs Non-Fiduciary Financial Advisor: What’s the Difference?
This is the question you need to ask before hiring any financial advisor: Do I want to go fiduciary vs non-fiduciary financial advisor? And trust me, the answer matters more than you might think.
A fiduciary financial advisor is legally required to act in your best interests at all times. They’re the ones who will put you first, even if it means recommending something that doesn’t make them extra money. On the other hand, a non-fiduciary financial advisor isn’t held to the same standard. They might offer solid advice, but they could also suggest products or investments that earn them higher commissions, even if those options aren’t necessarily the best fit for you.
Now, not all non-fiduciary advisors are bad or sneaky, but the difference between fiduciary vs non-fiduciary financial advisors comes down to trust. Are you confident they’ll have your back, or are they trying to profit from your decisions? This is one of the most important factors to consider when deciding who to hire.
So, when you sit down with a potential advisor, ask directly: “Are you a fiduciary or non-fiduciary financial advisor?” It’s a small question that could make a huge difference in how your financial future plays out.
What’s Their Fee Structure?
No one likes to talk about fees, but when it comes to financial advice, it’s a conversation you need to have upfront. Advisors can charge fees in different ways: some work on a flat rate, others take a percentage of your assets, and some charge based on the transactions they make.
Understanding how your potential advisor charges will help you figure out if their services are worth the cost. If someone is charging you based on the size of your portfolio, ask yourself if their guidance is going to increase its value enough to justify the fee. If they charge per trade, you need to be sure you’re not going to end up in a whirlwind of unnecessary buying and selling just to rack up fees.
Bottom line? Be clear about what you’re getting into. You don’t want to be surprised by hidden costs or confusing payment structures down the line.
What Type of Investments Are You Comfortable With?
Before you hire anyone, you need to get a solid grip on your risk tolerance. Are you someone who loves the thrill of high-risk, high-reward investments? Or do you prefer playing it safe, sticking to slow, steady growth over time? Knowing your risk appetite will help you communicate your preferences to your financial advisor.
This is where it’s important to ask potential advisors which types of investments are most stable. Some advisors might push you toward more aggressive strategies to grow your money quickly, while others may focus on safer, lower-risk options. The key here is finding someone whose investment philosophy matches your own comfort level. After all, you don’t want to lie awake at night worrying about risky moves that don’t align with your personal preferences.
Make sure your advisor isn’t trying to push you outside of your comfort zone just for the sake of your commission or ego. You’re the one in control here.
What’s Their Track Record?
You wouldn’t hire a contractor without checking their previous work, so don’t hire a financial advisor without knowing their background. Ask about their experience, how long they’ve been in the industry, and what kind of clients they typically work with. It’s also a good idea to get some references or check reviews if they’re available.
Here’s a tip: look for an advisor who has experience with clients like you. If you’re a young professional, someone who’s spent most of their career working with retirees might not fully understand your financial needs. On the flip side, if you’re approaching retirement, you want someone who’s been through that process before and can guide you through it smoothly.
And don’t be afraid to dig into their performance. Ask them about their success rate or how they handled clients’ portfolios during tough economic times. Their track record matters, especially when your hard-earned money is on the line.
Trust Your Gut
At the end of the day, choosing a financial advisor is about more than just credentials and fees—it’s about trust. You need to feel confident that this person has your back and understands your goals. If something feels off during your conversations, listen to that inner voice. Your money is personal, and you should feel comfortable with the person guiding your financial journey.
Take the time to do your homework, ask the tough questions, and trust your instincts. The right financial advisor can be a valuable partner in helping you reach your financial goals, but it’s up to you to make sure you’re hiring the right one.