How Do I Pick a Financial Advisor?

Dear Kristin,

How do you know when you need a financial advisor, and can you share any tips on how to choose the right one?

Sincerely,

Rowdy Rangers Fan

Dear Rowdy,

This is a great question and one that we hear a lot.

Let’s start with the first question: How do you know when you need a financial advisor? The answer, in short, is that it really depends on you. Do you want to invest, plan for retirement, or just get your financial life in order but don’t have time or the desire to research the details yourself to perform this work? Then it might be a good idea to hire someone whose only job is to advise people about their financial lives. This is the same way you might hire someone to do your taxes or clean your house. Even if you can do it yourself, if you can afford to pay a professional to take this task off your shoulder, why not outsource these tasks? 

Another good reason for hiring a financial advisor is when your financial picture becomes more complicated than you’re willing to manage alone, such as if you own multiple properties or invest heavily in stocks and other assets. For someone in this scenario, it might be best to hire a financial planner (a type of financial advisor who offers more comprehensive services). Consider the complexity of your finances to determine whether it might be a good idea to seek extra help. 

Once you’ve decided you do want to hire someone to help take care of your money, where do you begin? For starters, it needs to be someone you trust and whose advice you’re willing to take, so choose wisely.

Next, decide why you want an advisor. Do you want help investing? Planning for retirement? Optimizing your taxes? Something else? All of the above? Asking yourself these questions will help narrow down the right type of advisor for you.

Then, you should find someone reputable. If you want more comprehensive services, you’ll probably want a financial planner, so look for someone who is certified. If they’re advising you on investments (or investing your money for you), they need to be registered with the Securities and Exchange Commission (SEC) or the appropriate state securities regulator.

You’ll want to ask other questions about their compensation, fees, typical clients, philosophy and approach to money, and areas of expertise. More importantly, if it doesn’t feel like a good fit, don’t hesitate to keep searching.

Good luck!

-Kristin