How Do I Know if My Financial Advisor is the Right Fit?

Dan Finnerty |

Choosing the right financial advisor can be tough. How do you know if it’s the right person (or company) to manage your life savings? It’s an important job and it pays to shop around for the best option for you and your family. Check out our advice below to see whether you should stick with your pro or find a new advisor to manage your investments.

Fees

One of the most talked-about aspects of financial advice is fees. There are countless ways that the investment advisory industry earns their keep - commission, advisor fees, loyalty charges, trailers, etc. To make matters worse, each individual investment may carry fees (often called Management Expense Ratios or “MERs”). Transaction costs for each trade are common, and there are additional fees for withdrawals and other services. The important thing to remember is that your investment advisor deserves to earn a living as long as their duty of care and professional advice are worth it to you as the investor client. Have an honest conversation with your current advisor about fees and minimizing costs - if you don’t get a clear answer, it’s time to shop around.

Fiduciary Duty

Different types of financial advice come with different status under the law. The gold standard is a “fiduciary duty” where an advisor is legally bound to work in the best interest of their clients and their money. Loyalty and care are the goals for these advisors. Bank employees and broker-dealers often do not have a fiduciary duty to their clients, and their allegiances can be split between their clients and their employer. Fiduciary duty isn’t free - you often pay more for the extra legal protection against conflicts-of-interest and unfavourable commission structure.

What’s important?

Choosing the right advisor is important, but it’s best to start with a simple exercise for yourself. Ask yourself what you need and what your goals are. Are you just investing in the stock market to earn a little extra income? Are you using insurance as part of your retirement plan? Do you have $10,000 or $10 million in your portfolio? Are you self-employed? Do you need expert tax advice? The more complex your situation, the better advice you’ll need from your advisor. Another thing to remember is that you don’t need to rely on one person. There are benefits to “one-stop shopping” when it comes to financial advice and wealth management, but different advisors can offer different expertise. Do your best to keep things simple for yourself, but don’t be afraid of a second option or splitting your portfolio between two advisors if you need specialized advice.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2024 Advisor Websites.