How to Choose The Right Financial Advisor in 2021

• Author: Chris Remington
• Posted: 2024-06-23

Whether you want to a have a lucrative investment basket, a sound financial plan, or anything similar this year, you need to have the right financial advisor by your side to be successful. A good financial advisor will provide you with professional advice on specific financial matters, such as the best way to invest, how to manage your current finances, how to save, how to protect your estate and so forth. While the idea of having such a hand is great, it can be difficult to determine the right person for you. Thankfully, I have compiled the top four factors you need to consider to make the right choice, so keep reading.
 

Determine the Specific Services You Need

Knowing the services you need from the advisor will help you make the right choice quickly. If your main focus is on investment portfolio management, for instance, you may want to work with an investment portfolio management specialist. Similarly, if you are more concerned about your postretirement financial health, a retirement planning specialist would be a great professional to work with.

In the financial advice industry, there are many specializations that you may want to get acquainted with to make your work easier. Some of the most popular ones include the following:

- Wealth planners. These professionals usually assist wealthy clients in managing their wealth to maintain or increase their net worth.
- Estate planners. You need an estate planner if you want to prepare your estate for your beneficiaries.
- Retirement planning specialists. These experts can help you prepare for retirement properly.
- Certified financial transitionists. If you're making a major life transition, such as selling a company, a CeFT can help make the process smooth.
- Certified exit planners. These professionals can help you exit your business properly.
- Understanding the different types of financial advisors can help you find the right person, as there's no federal law that regulates "financial advisors."
 

Consider the Amount of Money You're Willing to Spend

Like many other professionals, financial advisors can be costly, so you need to understand how much the people you're considering cost, and how much you're willing to spend. In general, we have certain standard cost levels you'll likely encounter in the industry. Firstly, you may come across "Robo-advisors."These are financial advisors whose annual fee is a certain proportion of your account balance with the service. Typically, they start at 0.25% of the total assets they're managing for you.

We also have "online financial planning services." These providers usually charge a proportion of your assets, a flat subscription fee, or both. Lastly, we have the "traditional human advisors." These usually charge a certain proportion of the amount under management, with a 1% median fee. For small accounts, however, it can range higher; it can be lower for the large ones.

Generally, you should look for advisers whose fees are not based on a percentage of your capital, since they tend to increase over time. In the long run, they rarely bear significant relation to the value delivered.
 

Assess Their Experience

Along with the two factors above, you need to know the record of the individual or company you're considering working with. One of the things you should be looking to find out is their financial service experience. As you know, it takes years of experience to become a real financial expert. You therefore need to ensure the years they've been in service, and the services they've been providing add up. For instance, if you want an estate planner, you should be looking for someone with years of estate planning experience. Years of retirement planning shouldn't count.
 

Determine Whether They're a Financial Fiduciary

A fiduciary is usually considered to be a registered investment advisor (RIA), and they're known to work at the best interest of their clients. While looking for a financial advisor, you might come across "broker-dealers," who, under federal law, are not bound to a fiduciary duty. They are required to make fitting recommendations to you, and disclose existing conflicts of interest. You should always look for registered investment advisor, as they're held to a higher standard of care and ethics while handling their clients' financial affairs.

Of course, there are many other factors you'd need to consider to determine the right financial advisor for you. However, to be on the safe side, understand the specific services you need and how much money you're looking to spend, and be sure to look for a fiduciary with enough experience.