Making the choice to entrust part of the responsibility for your financial decisions to an independent advisor is an important step—one that can feel overwhelming when it comes time to select the specific advisor with whom you would like to work.
If you are new to working with an independent financial advisor, you may not know where to start – or how to tell if the person or firm you are considering is the right fit for you. Before you make a final decision, be sure to avoid these common pitfalls so that you can start off on the right foot and develop a meaningful relationship with a professional who can help you achieve good financial health.
Not Understanding Where Their Money Comes From
One of the biggest and most common pitfalls that a person interested in financial advising will encounter is a lack of understanding about how financial advisors are paid. You may prefer an independent financial advisor who is a fiduciary—this means that they are obligated to operate and make choices that are in your best interest, rather than their own.
Some advisors can have impressive credentials at the end of their name, or affiliations with well-known firms like J.P. Morgan. However, this does not guarantee that they have your best interests at heart. When an advisor who is not a fiduciary is affiliated with certain companies or products, they may be more likely to recommend those products to you because it earns them a commission.
This is why you may want to consider an independent advisor who is unaffiliated with most or all of the common financial firms. Either way, it’s a good idea to check if the person to whom you are entrusting your money is a fiduciary. This will give you better insight into the financial advisor’s motivations and goals.
Choosing An Independent Financial Advisor With Different Strategy Opinions
Another important consideration when researching financial advisors is their general approach to money management. Some advisors may encourage diversifying your portfolio with bonds or mutual funds, while others are more comfortable pushing stocks and may favor a higher-risk, higher-reward approach.
While neither of these strategies are inherently good or bad, they may not be right for you. Take some time to understand your personal risk tolerance, your own short- and long-term goals, and your ideal financial arrangement to ensure that you match with an advisor who is on the same page.
Hiring The First Advisor You Find
It can be tempting to hire the first advisor who seems like a good fit, and many times, this happens to be the first one that you review. The reason for this is that you do not yet have a “barometer” with which to compare different advisors, and so the first advisor usually tends to feel like a great choice.
Be sure to examine a number of options, especially options that are local to you, in order to make an informed choice. This does not, however, mean that the first advisor you find is necessarily the wrong pick! Just be sure to do your due diligence when conducting research.
Selecting An Advisor Outside Your Preferred Specialty
Just like how some advisors favor stock options while others prefer mutual funds, some advisors specialize in certain areas. It is important that you select an independent financial advisor who aligns with your specific goals and needs. If your primary concern is retirement planning, you may prefer to find an advisor with retirement planning experience rather than one who works in the business investing field.
Even advisors who claim broad experience have a few fields where they are more active. Financial advisors who specialize in a particular field may have better insight and knowledge of common pitfalls you could encounter along the way.
Trust Inflection Advisors For Your Independent Financial Advisor
Whether you are still in the research phase of selecting an independent financial advisor or you are already prepared to commit to an advisor and begin your financial journey, do not hesitate to consult the experts.
The professionals at Inflection Advisors would be happy to help you understand how to achieve your present and future financial goals. Reach out to learn more about our specialties, ask a question, or get started today with an independent financial advisor.
