Treat Hiring a Financial Advisor Like Buying a House

How to Find the Right Financial Advisor for You

Many people have a negative impression of the financial industry, and of financial advisors in particular, but how bad is the situation? There have been numerous reports circulating recently (examples can be found here and here) about people getting scammed by high fees and improper sales tactics at their financial institutions, but there are things you can do to help protect your assets.

You might be thinking that you are better off just going it on your own, and with the uptick in robo-advisors and discount brokerages, this is easier (and cheaper) than ever before. I’m not here to dissuade you from doing that, but make sure you are willing to put in the time and do your research before building your own investment portfolio. Yes, it will be cheaper, but if you don’t really know what you’re doing, then it could cost you in the long run. Some people love being in control of their investments, but others want nothing to do with it, and for them, having the right person on their side can make all the difference. If you want to take the DIY approach, then it’s not a bad idea to seek out a fee-for-service planner in your area that can help you with more detailed planning when you need it. This way you can manage your own investments but still receive the expert advice and planning skills of someone but only when you need it. Most fee for service planners will charge an hourly rate or have a flat rate for the preparation of a plan.

How do you know if you have a good advisor?

There’s no perfect answer to that question, and an advisor who might be the best fit for one person might not be the best fit for another. A lot of advisors have a particular focus and have more knowledge in some areas than others. For example, if you are planning to retire in the next year your needs will be very different from someone who is just starting to invest and wants to take more risk. There’s also no magic number to look for when it comes to how much an advisor should charge or how high your rate of return should be. If you are meeting your goals and are happy with the service you are receiving, then you’re likely in the right place.

What you really want is to be comfortable with whoever is running your investments. This is your life savings after all, so having someone you trust in charge is essential. And by this I don’t mean your closest friend or family member who happens to work in finance…don’t go that route, it can get messy. The financial industry is sort of an ‘old boys club’ (shocking right?), and this can make finding someone to manage your finances daunting, especially for young investors and us ladies. If you feel like you are getting forced into something then let the person know you need some time to think and continue the search somewhere else. I promise there are great advisors out there, you might just need to kiss a few frogs along the way.

If you are in need of an advisor or looking to make a change, there are some tips you should follow when seeking someone out. Think of the process like buying a house; you wouldn’t walk into the first place you see and throw all your money at it right? Not a chance! You would look at lots of different options, get the place inspected, do some research on the neighbourhood, and figure out how much it’s going to cost you both short and long term. Choosing who is going to be in control of your life savings is an equally important decision, and you should take it seriously.

You have options!

Just because you do all your banking and maybe have your mortgage at your bank it does NOT mean you need to have your investments there as well, no matter how much they pressure you. If you are new to investing and are just starting to build your assets it can be a challenge to find a more experienced advisor to work with. One way around this would be to contact your parent’s advisor, often they will be more willing to help because of the family connection.

Ask your family and friends

Getting a referral from a trusted friend or family member is often the best way to find someone and many advisors will take on referrals even if they aren’t technically accepting new clients. Money can be such a taboo subject to talk about but if you are working with someone you think is amazing then share that info! You can also ask other professionals you use; accountants, lawyers, mortgage brokers, etc. often have relationships with advisors and can provide a referral.

Interview more than one person

Take the process seriously and line up meet and greets with at least a couple of different advisors before making your ultimate decision. Be prepared with some general questions but also questions that relate to your specific situation. For example:

  • What is your investment philosophy? And can you show me a mock portfolio?
  • What is your fee structure and how do you get paid?
  • What do you know about my specific pension plan?
  • What demographic are most of your clients?

Ask for references

Yes for real! A potential advisor should be able to give you the names and contact information for a few clients who you can get in touch with and see how happy they are with the service. If they’re not willing to do this, then there’s probably a good reason for it. Obviously, only people with positive things to say will be asked to be references, but it can still provide some degree of comfort knowing that other people out there are happy.

What services do they provide?

How much an advisor charges isn’t the only thing to focus on and going with the cheapest option might not actually give you the best value. Think (and ask) what other services might be provided. Not only can your financial advisor give you guidance on which investments are right for you, but many also offer comprehensive plans and advice on such topics as tax planning, debt repayment, pension plans, budgeting, and buying a home. A detailed financial plan can cost you hundreds of dollars so if your advisor is willing to do that at no charge and keep it updated you should factor that in when it comes to fees.

Bad advice is out there, both floating around the internet and coming from so-called professionals, so you need to prepared to deal with that. Remember, it’s your money, and that means you have a certain responsibility to do your homework and make sure you are only taking advice from someone you trust and who knows what they’re talking about. You wouldn’t buy a house just because somebody told you it was a great deal, so don’t make the same mistake with your money!

How to Find the Right Financial Advisor for You

This post was proofread by Grammarly.

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