How to Find The Best Financial Advisor For You
- A financial advisor provides financial services, such as short-term and long-term strategies for building wealth, defining personal and financial goals, and managing risk.
- You need to know if your potential advisor can only provide traditional and innovative financial advice.
- You want to find someone who matches your risk tolerance, understands your goals, and you trust to guide you in the right direction.
Everyone has good and bad experiences with money along their financial journey. Therefore, money shouldn't be a secret, nor should you be ashamed of your mistakes because you are not alone. Instead, what you learn from your financial experiences is most important.
Benefits of Having a Financial Advisor
While there are some things that you can do on your own to improve your financial situation, such as creating and sticking to a budget, it is also a good idea to consult with a financial advisor. A financial advisor provides financial services, such as short-term and long-term strategies for building wealth, defining personal and financial goals, and managing risk.
One of the biggest misconceptions is that only the wealthy can afford or need a financial advisor. However, that is not the case. Different advisors serve different clients with a range of income and net worth. The most important thing for your and your financial future is finding the financial advisor who is best for where you are now and what you hope to achieve over time.
Financial Advisor: Seller vs. Advisor
When searching for the best financial advisor for you, do your research or ask your potential advisor what is the best lesson they have learned about money and financial literacy. Knowing the answer to this question will help you determine if your potential advisor has been trained to sell you products and services or if your advisor will give you some advice based on their experiences. For example, their answer might tell you they made some mistakes, learned the hard way, or came from money but learned to manage it properly.
A strong suggestion would be to interview fiduciaries. These advisors will put your interests first and won't just sell you products you don't need.
Overall, if a potential advisor dodges the question regarding their financial learnings or sticks with sales tactics, this is probably just a job they do to get commissions and not the best advisor for you.
Level of Financial Experience in Personal and Professional Life
Financial advisors are licensed professionals, but knowing where they are in life could be a deciding factor for you. So, are they just starting and learning the ropes, or are they seasoned but have ideas that will work for your generation? Knowing the answer to this question allows you to filter out those who lack personal knowledge and experience. You also may get a glimpse into whether they are truly passionate about their job.
All too often, financial institutions or agencies hire seat fillers who aren't passionate about what they do. If this is the case, these are not the people you want to be influencers or give you a strategy that impacts your life and financial future.
Understands New Ways to Build Wealth
What worked for your grandparents may not work for your generation. Therefore, you need to know if your potential advisor can only provide traditional advice. Traditional advice sounds like, "I'll help you save for your child's education with a savings account and automatic transfers." While some core financial strategies can still be highly effective over multiple generations, that is not the case for all finances.
You want your financial advisor to understand the traditional way of doing things but also be innovative and keep up with the changes in the economic landscape. Innovative advice sounds like, "Buy a $50,000 investment property with 3.5% or less down. Get a property manager to manage the place while slowly recouping your down payment, and the property appreciates over the next 18 years. Then, when it is time for your child to go to school, you can sell the property to pay for your child's education."
The example above requires a down payment of $1750, a decent credit score, and the patience to find a property manager or tenants. On the other hand, your advisor may counter the financial strategy above and instead suggest you invest your money in an index fund for 18 years or buy a whole life policy and borrow against it when the time comes.
The Money Wrap-Up
Finding the right advisor for you will require effort, but once you have found the right person, it will be a financial game-changer. You want to find someone who matches your risk tolerance, understands your goals, and you trust to guide you in the right direction.
Based on your desire for innovative ideas, you will need someone who thinks outside the box. However, overall and most importantly, choose a financial advisor who will help you accomplish your financial goals.
A version of this article blog was previously posted on the blog of the contributor.