How To Find A Good Financial Advisor: Part 1

So you want to find a good financial advisor?

Okay, that’s great. You want someone to work with you and help you make good financial decisions. Excellent!

https://youtu.be/f66XDjX-PJQ

There’s just one problem. There are hundreds of thousands of financial advisors out there. How are you going to find the one who is right for you?

I’m going to give you seven simple requirements in the next four lessons that will help you eliminate 95% or more of the advisors out there and leave you with the cream of the crop from which to choose.

If you’re an overachiever, you may have noticed there are three lessons on this topic. That seems like a lot. But here’s the thing. Working with a good financial advisor can make the difference between success and failure. It makes sense that you find the right one to oversee your financial future.

I wish I could sit down with you and help you find the right advisor, but instead, I’m going to give you seven simple requirements in the next four lessons that will help you eliminate 95% or more of the advisors out there and leave you with the cream of the crop from which to choose.

There are seven criteria for finding a good financial advisor.

Here’s the first one:

Criteria 1 – Hire a Fiduciary

Oh, man. Really? That’s how the list starts? Hire a fiduciary? What the heck is a fiduciary? Okay, how can I make this simple? There are two broad categories of advisors – fiduciaries and non-fiduciaries. Fiduciaries are legally obligated to put their clients’ interests first, whereas non-fiduciaries can offer advice that is not in your interest as long as it is “suitable” to you. Clearly, it behooves you to work with an advisor who will always put your interests first, ahead of their own interests and of the firm they work for. Surprisingly (or maybe not so surprisingly), almost all of the big brokerage firms you see advertising on TV are not fiduciaries. They can put their (financial) interests ahead of the client, and this is perfectly acceptable, as long as they meet the minimum requirement of it being suitable to you. Don’t settle for suitable. Hire a fiduciary.

Criteria 2 – Use Only Big Custodians

One of my favorite shows on TV is American Greed. This is a show where unsuspecting people got bilked out of their life savings by unscrupulous advisors. It’s sad, very sad. One way to protect yourself is to make sure your investments are held at a big custodian. What does this mean? Basically, you want your money to be at a separate and unrelated firm from your investment advisor. For example, my clients don’t send money to Pacifica Wealth Advisors; they send it to Schwab or Fidelity. I can still help them invest and manage their investments, but the money is not at my firm. The benefit from this is that this separate custodian will send you monthly statements. This way you can see exactly what is happening in your accounts.

Is that all you need to know? Not quite. You’re going to learn about three little letters that separate the boys from the girls. Or the men from the girls. Or the men from the boys. Whatever. It’s good and you’re going to learn about it.

The proceeding blog post is an excerpt from Get Money Smart: Simple Lessons to Kickstart Your Financial Confidence & Grow Your Wealth, available now on Amazon.