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7 Mistakes People Make When Choosing a Financial Advisor

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

A 2022 Northwestern Mutual study found that 62% of U.S. adults admit their financial planning needs improvement. However, only 35% of Americans work with a financial advisor.1

The value of working with a financial advisor varies by person. While advisors are legally prohibited from promising returns, research suggests that people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.2

Consider this example: A 2019 Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.3

Hiring an advisor could increase your returns by 2x

Potential Savings Over 25 Years With An Advisor

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

The hypothetical study discussed above assumes a 5% net return and a 3% net annual value add for professional financial advice to performance based on the Vanguard Whitepaper “Putting a Value on your Value, Quantifying Vanguard Advisor’s Alpha”. Please carefully review the methodologies employed in the Vanguard Whitepaper. To receive a copy of the whitepaper, please contact The value of professional investment advice is only an illustrative estimate and varies with each unique client’s individual circumstances and portfolio composition. Carefully consider your investment objectives, risk factors, and perform your own due diligence before choosing an investment adviser.

SmartAsset’s no-cost tool can help you avoid some of the common mistakes in looking for an advisor. How does the free tool work? It’s easy:

Short Questionnaire

Short questionnaire takes just a few minutes

Match With Advisors

Match with up to three fiduciary financial advisors

Compare Your Advisor Matches

Compare your matches and choose the one you feel is best for you

The fiduciary financial advisors you match with serve your area and are legally bound to work in your best interest. You may even be able to instantly connect with an advisor for a free retirement consultation. Advisors are rigorously screened through our proprietary due diligence process.

We made our tool because finding an advisor can be tough. A good advisor can give you great peace of mind; avoiding these seven blunders could save you years of stress. Scroll down for the list.

Smart Financial Tools

1. Hiring an Advisor Who Is Not a Fiduciary

A fiduciary is defined as an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and disclose any potential conflicts of interest to clients. Our free tool will only match you with registered or chartered fiduciary advisors.

Non-Fiduciary Advisor

Hiring an advisor who is not a fiduciary means they could recommend decisions that may not be in your best interest.

If your advisor is not a fiduciary and constantly pushes investment products on you, use this no-cost tool to find 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 first 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. Our platform seamlessly matches you with up to three advisors, allowing you to compare each to help you determine which is best for you.

3. Choosing an Advisor with the Wrong Specialty

Some financial advisors specialize in retirement planning, while others may be most helpful for business owners or those with a high net worth. Some may specialize in helping young professionals starting a family.

Wrong Specialty

Be sure to understand an advisor’s strengths and weaknesses before signing the dotted line.

4. Picking an Advisor with an Incompatible Strategy

Similarly, 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 specialized in bonds is not a great match for your style. Our quiz will ask you some questions that may help start this conversation - but it's important you bring it up with any advisor you speak to.

We made it easy to find a financial advisor, so you could potentially avoid these mistakes.

We made it easy to find a financial advisor, so you could potentially avoid these mistakes.

5. Not Asking About Credentials

To give investment advice, financial advisors are required to pass a test. Financial advisors tests include the Series 7, and Series 66 or Series 65. Our platform will list each of your matches credentials, for easy comparison.

Not Asking About Credentials

Ask your advisor about their licenses, tests, and credentials. Some become a Certified Financial Planner (CFP).

6. Not Understanding How They are Paid

Some advisors are "fee only" and charge you a flat rate no matter what. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds, a serious conflict of interest. If the advisor earns more by ignoring your best interests, do not hire them. For a refresher on fiduciary advisor obligations, see Mistake 1!

7. Not Hiring a Vetted Advisor

Chances are, there are several highly qualified financial advisors in your community. With all these considerations, it can feel daunting to choose one.

Finding a Vetted Advisor Takes Just a Few Minutes

Our no-cost tool makes it easy to find a vetted financial advisor. The entire matching process takes just a few minutes.

Click Your State to Get Matched With Financial Advisors Who Serve Your Area
After you choose your state and answer a few questions, you can compare up to three advisors that serve your area and decide which to work with.
Find up to three advisors who serve your area, free!

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Our retirement matching tool can help match you with up to three fiduciary advisors. You can receive your matches and schedule an introductory call for free!

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