Finding the Perfect Advisor - 4 Tips to Double Your Retirement Savings
Seeking a financial advisor to boost your nest egg growth? Recent research indicates that choosing the right professional could potentially double your retirement savings. Discover how to find the ideal advisor for you.
In the 1980s, when I applied for a financial advisor position, I was confident I'd secure the job because of my CPA background. However, I was taken aback when the interviewer expressed a preference for a used car salesman over a CPA.
I initially thought it was a knowledge-based role, only to realize it was more of a sales position. This experience highlights why the financial advisory field gained a somewhat negative reputation.
However, the value of sound financial advice cannot be overstated. According to a Vanguard study, a hypothetical $500,000 investment over 25 years could grow to $1.7 million if managed independently, but over $3.4 million with a financial advisor – double the amount and truly transformative.
So, the question arises: How do you find a reliable financial advisor? This article provides straightforward tips and useful resources, some of which weren't available in my time.
1. Explore Multiple Options
Consider this: What if you committed to the first person you ever dated? Just as in relationships, when it comes to financial advice, it's beneficial to explore your options. This way, you can identify the perfect match for your needs.
Back when I was an advisor, finding the right fit was challenging. Nowadays, though, there are free online services that simplify the process of discovering your ideal financial advisor. You complete a brief questionnaire and get matched with up to three local advisors. It's a quick process, often with the added perk of a free consultation.
If you have at least $100,000 in investments, give SmartAsset a try. Fill out a short questionnaire, and you'll instantly be connected with up to three qualified financial advisors in your area.
2. Ensure They're a Fiduciary
This step is crucial. A fiduciary is obligated by law to prioritize your best interests. Some advisors might push products that offer them higher commissions, even if those products aren't the best fit for you. Essentially, they function more as salespeople.
To safeguard your interests, stick to fiduciaries. When considering an advisor, directly ask if they are a fiduciary, and don't simply take their word for it.
Wealthramp is a valuable free service that pairs you with fiduciary advisors. These advisors undergo personal interviews and evaluations by Pam Krueger, the founder and co-host of the MoneyTrack series on PBS television. I've personally known Pam for 30 years.
3. Inquire About Fees and Compensation
Financial advisors earn money through various methods, such as hourly rates, annual retainers, or fees based on assets under management. Some may also receive commissions for promoting specific investments. Before committing, ensure you fully grasp how an advisor is compensated and steer clear of those relying on commissions, as it can cloud their objectivity.
Understanding an advisor's payment structure is crucial. If you have a minimum of $150,000 in investments, you can utilize Zoe Financial, a free service that assesses your financial goals, matches you with a carefully selected group of advisors, and arranges a complimentary consultation.
4. Verify Their Credentials and Experience
The time someone has spent offering financial advice matters. A person with 20 years of experience might charge the same as someone with only 20 months. While experience isn't the sole factor, it's a valuable consideration, whether you're dealing with a doctor, mechanic, or financial advisor.
A reputable financial advisor typically holds certifications such as CFP (Certified Financial Planner) or CFA (Chartered Financial Analyst), which involve rigorous training and ongoing education. Be cautious of advisors lacking solid credentials, as it could suggest a lack of expertise or commitment to their profession.
For a reliable matching service, you can explore WiserAdvisor.com, which has connected over 100,000 individuals with financial advisors since 1998, without any cost or obligation.
Do You Really Need a Financial Advisor?
The purpose of hiring an expert, whether it's a doctor, lawyer, or financial advisor, is to obtain accurate answers to crucial questions.
If you're 21 and casually contributing to a 401(k) each month, and you're willing to do a bit of reading, you might be okay managing your finances independently. However, as you age and accumulate substantial savings, your financial matters become more intricate, and the impact of your decisions becomes more significant.
A good advisor can go beyond guiding your investments; they can create a comprehensive financial plan. They assist in reducing income taxes, planning your estate, setting a retirement date, providing Social Security claiming advice, and much more.
An advisor can also help you avoid costly mistakes, alleviate stress, and free up your time. However, the most valuable service they offer is peace of mind — assurance that you're on the right path, acting as a second set of eyes, and potentially being there for you in times of need.
If you're unsure whether an advisor is right for you, don't worry. That's what a free consultation is for. Click the links in this article or explore our Financial Advisor Comparison for more information. A free consultation can't hurt, and it might just be the game-changer you need.
