A D V E R T I S E M E N T

The web's best personal nance advice.

7 Mistakes People Make When

Choosing a Financial Advisor
IN THE PRESS:

SmartAsset AWARDS & ACCOLADES

Mar. 24, 2021

Choosing a nancial advisor is a major life decision that can determine your nancial trajectory for years to come. 

A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their nancial planning needs improvement.
However, only 29% of Americans work with a nancial advisor.

Assuming 5% annualized growth of $500k portfolio vs 8% annualized growth of advisor managed portfolio over 25 years.

Source: Vanguard Research

The value of working with a nancial advisor varies by person and advisors are legally prohibited from promising
returns, but research suggests people who work with a nancial advisor feel more at ease about their nances
and could end up with about 15% more money to spend in retirement.

SmartAsset’s no-cost tool simpli es the time-consuming process of nding a nancial advisor. A short
questionnaire helps match you with up to three local duciary nancial advisors each, legally bound to work in your
best interest. The whole process takes just a few minutes, and in many cases you can be connected instantly with an
expert for a free retirement consultation.

All advisors have been vetted and veri ed through a rigorous screening process. SmartAsset con rms each advisor is
registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possesses the
proper licenses and has no pending or valid regulatory disclosures within the past 10 years.

Being aware of these seven common blunders when choosing an advisor can help you nd peace of mind, and
avoid years of stress.

Helpful Resources 

Today's Top Mortgage Rates

> These historically low rates can save you thousands on a home purchase or re nance.  See Rates

Top Online Brokerage Accounts

> This online brokerage comparison tool helps nd the best trading platform for you.  Try Now

Today's Top High-Interest Savings Accounts

> These savings accounts have interest rates up to 500x the national average. See Accounts

1. Hiring an Advisor Who Is Not a Fiduciary

By de nition, a duciary is an individual who is ethically bound to act in another person’s best interest. This
obligation eliminates con ict of interest concerns and makes an advisor’s advice more trustworthy. 

All of the nancial advisors on SmartAsset’s matching platform are registered duciaries. If your advisor is not
a duciary and constantly pushes investment products on you, use this no-cost tool to nd an advisor who
has your best interest in mind.

2. Hiring the First Advisor You Meet

While it’s tempting to hire the advisor closest to home or the rst advisor in the yellow pages, this decision
requires more time. Take the time to interview at least a few advisors before picking the best match for you. 

3. Choosing an Advisor with the Wrong Specialty

Some nancial advisors specialize in retirement planning, while others are best for business owners or
those with a high net worth. Some might be best for young professionals starting a family. Be sure to
understand an advisor’s strengths and weaknesses - before signing the dotted line. 

4. Picking an Advisor with an Incompatible Strategy

Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are
more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a
great match for your style.

5. Not Asking about Credentials

To give investment advice,  nancial advisors are required to pass a test. Ask your advisor about their
licenses, tests, and credentials. Financial advisors tests include the Series 7, and Series 66 or Series 65. Some
advisors go a step further and become a Certi ed Financial Planner, or CFP.  

6. Not Understanding How They are Paid

Some advisors are "fee only" and charge you a at rate no matter what. Others charge a percentage of your
assets under management. Some advisors are paid commissions by mutual funds, a serious con ict of
interest. If the advisor earns more by ignoring your best interests, do not hire them.

7. Trying to Hire an Advisor on Your Own

Chances are, there are several highly quali ed nancial advisors in your town. However, it can seem daunting
to choose one. 

Our no-cost tool makes it easy to  nd the right nancial advisor for you. Now you can get matched with up
to three local duciary investment advisors that have been rigorously screened for regulatory disclosures and
to con rm their licenses. The entire matching process takes just a few minutes.

Click Your State to Get Matched With

Financial Advisors Near You
After you choose your state and answer questions about your nancial goals, you can
compare up to three advisors local to you and decide which to work with.

Investing involves risk and no situation is the same. This is in no way intended as a
personal recommendation and investment decisions are solely those of the reader.

SmartAsset is a personal nance technology company that features a nancial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which
SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe
of Financial Advisors.

Sources:
1. Northwestern Mutual study
2. Value of a Gamma-Ef cient Portfolio (2017), Morningstar Investment Management.
3. The Return on Advice (2016), Envestnet, Capital Sigma.
4. Value of a Financial Advisor Study (2017), Russell Investments.
5. Advisor Value (2014), Voya Retirement Research Institute.
6. Journal of Retirement Study

Terms of Use  |  Privacy Policy  |  About Us

Get Smart with Your Assets 
© 2020 SmartAsset