The Biggest Mistakes People Make When Choosing a Financial Advisor

Everyone could benefit from the expertise of a well-educated and experienced financial advisor. However, not all financial advisors are created equal and investment advice can vary greatly if they don’t have the experience to understand how to help you reach your goals. This is why it’s so important to understand how to choose a great financial advisor that has your best interests in mind.

Today, we’ll cover nine of the biggest mistakes people make when it comes to choosing a financial planner and how you can avoid them. Keep these nine tips in mind as you begin your search for your ideal financial advisor. Remember that you shouldn’t rush into a decision that can have such a big impact on your future.

1. Don’t Hire the First Financial Advisor You Meet

While it may be tempting to hire the first financial advisor you come across, it’s not always a good idea to go with the first advisor you meet. Yes, even if they’re your friend, family member, or neighbor. This isn’t a decision you should make in haste. Take the time to sit down and speak with a few different financial advisors. It’s a common mistake for people to rush into choosing an advisor but your financial decisions should never be taken lightly. You want to seek out a wealth manager with plenty of experience in helping people in your financial situation with your goals. Ask them a lot of questions and keep your eyes open for any red flags.

These days, the fondness for social media has made it easier for people to see the benefits of a financial advisor. However, it’s important to not rely solely on social media when it comes to choosing who you want to work with. Just because a particular advisor has gone viral on Facebook or TikTok does not mean they’re the best choice for you. It’s important that you look around and
speak with a few different options before settling on who you want to help with the management of your finances.

2. Don’t Hire a Financial Advisor Who is Not a Fiduciary

Being a fiduciary means that they are ethically bound to act in your best interest. It also means that their financial advice is likely to be more trustworthy. Your advisor team should always have your best interests in mind. Brokers are not held to the fiduciary standard. A fee-only financial planner is held to the highest fiduciary standards.

It’s important to always make sure your financial advisor team is looking out for your best interests. The financial world changes rapidly and if your advisor is looking out more for themselves than they are for you, this can cause serious problems down the road. Having a wealth management specialist that can pivot with the changes in the world to protect your best interests is priceless in this day and age.

3. Don’t Choose an Advisor with the Wrong Specialty

It’s important to ask the financial advisor about their experience and specialty. One certified financial planner may specialize in retirement planning while another may prefer to take on business owners with high net worth as clients. It’s vital to understand an investor’s strengths and weaknesses before agreeing to do business with them. If they don’t specialize in what you’re needing them to do, and they’re not backed by an experienced team that can help them through their areas of weakness then they may make mistakes. The last thing you want is someone making mistakes when it comes to the future of your finances.

At Virtus Wealth Management, each client is backed by our entire team. If your point of contact doesn’t specialize in what you’re looking for, chances are that someone on our team does. Be sure to let us know what you’re looking for when it comes to your financial future. Our team works together to focus on the big picture, creating a plan that focuses on all of your goals for more cohesive investment management.

4. Don’t Pick an Advisor with a Strategy Incompatible with Your Lifestyle

When it comes to financial situations, the advice you get from your investment manager should work with your financial life. Advice varies from advisor to advisor. They each have their own strategy for different situations. If you want to invest in only stocks, then choosing an advisor who favors index funds and bonds likely isn’t a good match.

Wealth management is more than just investment advice. Our clients benefit from our holistic approach to unify and coordinate decisions regarding their financial lives to produce enhanced results. Our proprietary process allows us to examine the big picture for each unique situation. We create custom-made stress-tested plans to ensure your confidence in your financial future’s potential. We want to know what makes you, you. We also want to create your custom game plan while considering your risk tolerance and goals, while still allowing you room to build your legacy.

5. Always Check References

Most advisors will gladly present references if requested. Calling references doesn’t take long and it can really help you gain perspective on your potential advisor’s performance. Not only do references let you know how a financial advisor performs for their clients, but it also lets you know how they respect their wishes and help them with their goals.

It’s a good idea to have a short list of questions handy when calling references. This allows you to get the information you need without having to take up too much time from the person or organization you’re calling. Try not to make your list too long as it’s important to understand that people live busy lives. Be polite and to the point regarding the information you’d like to know.

6. Ask About Credentials

In order to work in financial planning, financial advisors must pass a test. Don’t be afraid to ask about tests, licenses, and any other credentials. Remember, you’re trusting them with your money. Make sure they know what they’re doing. At a minimum, the standard for financial planning is the designation CFP for Certified Financial Planner. However, this is just a starting point when it comes to credentials.

When you partner with Virtus Wealth Management, you work directly with one of our educated and experienced advisors as your point of contact. You can also rest easy knowing that behind the scenes you’ll have an entire team of wealth management professionals working hard to support your needs. Our credentials include CPWA(R), CFP(R), ChFC(R), CLU(R), and CRPC(R). To learn more about what these credentials mean, visit our website.

7. Don’t Make Assumptions, Good or Bad

Just because a financial advisor is associated with Morgan Stanley or J.P. Morgan, doesn’t mean they’re automatically the best advisor for you. While working with these reputable firms can offer different financial tools or information, you shouldn’t choose someone based on branding alone.

It’s equally important not to assume that if one agent seems to be nicer or friendlier than another that they’re the best choice. While you may like their personality better or they may be a better salesman, those things don’t make up for experience and breadth of service.

You want to strive for a balance to find the financial advisor that’s right for you. Take a look at what their company offers and think about if it aligns with your goals. Read the reviews from current and former clients to see what they’re saying about a particular financial advisor or wealth management company. Remember that one or two reviews, either way, aren’t going to paint a very clear picture. It’s important to check a variety of sources to see what people are saying. You can also take note of how the company responds to any negative reviews.

You may also want to check out the “About Us” page on their website. This page can often provide insight into the company’s team, how they work, their process, credentials, reviews, and much more. There’s a lot of information out there and you should never assume anything, good or bad, based on what one person says about a company or an individual.

8. Understand How Financial Advisors are Paid

Advisors get paid in different ways. Some will charge a flat rate, no matter what. Others will charge a percentage of the assets they manage. Others still are paid commissions on things like mutual funds, which can lead to a conflict of interest. Fee-only financial advisors have the least amount of conflict of interest due to the way they’re paid.

You also want to be aware of what you’re getting for your money. Some advisors may have free or low-cost plans that they use as loss leaders to get clients to the table. While this typically isn’t a bad thing, it may lead to them pushing financial products you don’t necessarily need. This is another reason why it’s important to understand how they’re paid. If they’re paid primarily on commission and the up sale of products and services then that’s what they’ll try to do, whether you need it or not.

Advisors choose to charge by commission or fee. These two styles have different regulations which impact how advisors service their clients. While we generally use fee-based management, there are situations where the option to charge by commission is in the best interest of the client. You want to find a wealth management company that always puts your interests first. They should be transparent, keep you informed, and do their best to serve you, the client.

9. Don’t Have Unrealistic Expectations

When you meet with potential financial advisors you want to have reasonable expectations. You also want to avoid anyone who encourages unreasonable expectations or makes unreasonable promises. Performance is never guaranteed. A good financial advisor understands this and will explain the risk levels of various investment options.

A skilled financial advisor will always do their best to meet your realistic expectations. However, it is important to understand that there is always some degree of risk when it comes to investing. It’s important to find a financial advisor who keeps your risk tolerance in mind when presenting you with your options. Your advisor should also be able to offer options that you’re comfortable with while explaining why those options may or may not be able to provide the return that you’re looking for.

When Do I Need a Financial Advisor?

Many people could benefit from the experience of a financial or investment advisor. By avoiding the common mistakes people make when hiring a financial advisor, you’re much more likely to be happy with the arrangement. Personal finance and investments can be overwhelming, especially for someone just getting started creating their financial plan for the future. Skilled financial planners can help you understand what it takes to pursue your goals.

Today’s economic conditions and uncertain financial markets require a savvy investor to navigate the tumultuous waters and go beyond traditional boundaries. Our goal is to help our clients prepare for a financially secure future. We appreciate long-term strategies that focus on your big picture.

A registered investment advisor or financial planner can also help with a number of other financial situations. They can help you with your retirement planning, answer questions about life insurance, address areas of financial concern such as credit cards or student loans, assist with tax planning, and in several other areas as well. A client may want financial consultants for their startup companies as well.

Virtus Wealth Management offers a Professional Service Review of your life insurance, disability, and long-term care policies to make sure your policies are working efficiently for you. We provide answers and guidance to many pressing questions. This is just one of the value-added services we offer for those in need.

Some financial advisors help individuals move forward after major life events such as divorce, the death of a spouse, managing the finances of their elderly parents, if they’ve recently inherited a large sum of money, and even managing the finances of married couples who want to make sure their savings account and retirement accounts are on track for the future of their dreams. Whatever your needs, a financial advisor is a great asset to make sure you’re on track to pursue your goals. Even if you’re not sure what your needs are just yet, speaking with a financial advisor will give you something to think about. Most people have a future they dream about, and a good financial advisor can help you translate that dream into real-world goals. They can also help you understand what you need to do to make that future more of a reality.

You should never rush into choosing a financial advisor. Your future is too important for rash decisions. Take the time to review the nine tips above. Keep these mistakes to avoid in mind on your search for a financial advisor and you’ll be on your way to a great relationship and a bright financial future.

Reach out to the experienced financial professionals at Virtus Wealth Management to learn more about the services we offer and how we can help you get on the path to pursuing the goals you’ve set for your financial future. Contact us today at 817-717-3812 to speak with one of our qualified financial advisors. We are happy to sit down and discuss what you’d like to see in your future to help establish a plan that takes your goals into account while working within your level of risk tolerance.

About the author

Lisa Parziale is an independent author that writes about various topics and owns a marketing company in North Texas. If you would like to contact Lisa, please use the information below.

Portside Marketing, LLC
1011 Surrey Lane, Bldg 200
Flower Mound, Texas 75022
(972) 979-9316
www.portsidemarketing.com

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.