Hiring a Financial Advisor for the First Time

A wallet with a cup of coffee sitting next to a computer keyboard: tips on hiring a financial advisor for the first time

If you’re thinking about hiring your first financial advisor, congratulations on a wise choice! At Good Life Mt. Pleasant, we know this decision requires careful consideration. After all, hiring a financial advisor or financial planner isn’t like picking something off the menu at a restaurant. Hiring the wrong kind of advisor or planner can have consequences for your carefully accumulated capital. That’s why it’s important to get the decision right on the first try. If you’re hiring a financial advisor for the first time, read on for a few tips to help you make the right choice. Afterward, if you have additional questions, please contact our team at Good Life Mt. Pleasant!

Understand the Different Types of Advisors

Advisors come from varied backgrounds and have different ranges of expertise. Not only that, but advisors often have different incentives to make recommendations. A fiduciary is an advisor held to the highest industry standards. Fiduciaries can only make investment and financial recommendations in the best interest of their clients. Non-fiduciary advisors can make recommendations that fall under the suitability standard, which means it fits the investor’s profile but may not be the cheapest option.

Advisors also cater to different types of clients depending on their certification and training. Non-fiduciary advisors are often brokers who don’t need the advanced formal training of fiduciary advisors. For example, a Certified Public Accountant (CPA) needs a degree from an accredited university, extra college credits, thousands of hours of professional experience, and the ability to pass a strenuous three-part exam. Understanding the designations and work background of potential advisors often tells you a lot about the types of services they provide clients. This brings us to the next point,

Know What Services You Need from an Advisor

You can’t walk into an advisor’s office and bluntly say, “I need help with money.” Advisors specialize in different areas of personal and business finance, so you’ll need to be specific with what you’re looking for. For example, an individual looking for ways to save for retirement would probably be better off going to a Certified Financial Planner (CFP) than a Chartered Financial Analyst (CFA). CFPs deal with clients looking for personal finance help; CFAs handle large portfolios for corporate clients.

Here are some of the common reasons you might seek the assistance of an advisor:

  • Retirement Planning – Putting money into a nest egg for retirement takes dedication, but we often need additional assistance allocating savings into the best possible vehicles.
  • Tax Planning – Taxes can be complicated, especially if you run your own business or have profited from a wide range of assets. Tax planning with an advisor can help reduce your obligation to Uncle Sam while staying in the IRS’s good graces.
  • Recent Windfall – If you inherit a significant sum from a parent or relative, you’ll probably have plenty of questions about what to do with your lump sum of cash. Buy a house? Invest in stocks? Bury it in the backyard? A good advisor certainly won’t recommend that last one, but they can help disperse your windfall into various safe and yield-earning assets.
  • Business Law and Accounting – Running a business means navigating complicated accounting and tax laws, so many companies retain an advisor’s services. A good advisor can help business owners with statements, documentation, accounting, and tax preparation.
  • Estate Planning – Deciding on how to pass assets down to heirs is an essential task for an advisor. These are often difficult conversations, but it’s important to have a plan in place to ensure a smooth process for our families. Is a will sufficient, or is an irrevocable trust the best place to have your assets? What about advanced medical directives and power of attorney? An advisor can help guide these decisions.

Learn How Your Potential Advisor Gets Paid

Finally, you’ll want to focus on the advisor’s pay structure. How exactly is your potential advisor compensated for their services? Some advisors earn commissions on the investments they recommend to clients, others charge a fee based on the services rendered. How the advisor is compensated is often a clue into what type of advisor they are.

Fee-based advisors usually receive a combination of client fees and commissions for their services. A fee-based advisor may charge clients by the hour and earn commissions for certain investments they sell.

Fee-only advisors don’t earn commissions on any products or investments they recommend. Instead, they earn money strictly from fees charged to clients. This can be done in any number of ways. Fee-only advisors commonly charge clients based on a percentage of the assets they manage, the time they spend with the client, or a one-time fee for a sophisticated financial plan. Fee-only advisors tend to be fiduciaries as well.

Get the Answers You Need at GLMP

Hiring an advisor for the first time is a personal decision, and you’ll need to find someone who fits stylistically as well as someone who offers the services you need. For example, if you’re an optimistic investor, a portfolio manager with a permanent bearish slant will likely be a bad fit. But if you ask the proper questions, you should have no trouble finding a good advisor match.

At Good Life Mt. Pleasant, we offer personalized wealth management and financial planning services to help our clients pursue their unique financial goals. Through an initial consultation and an ongoing relationship, we work closely with you to understand your current situation and lead you toward solutions that can help you reduce risk, build wealth, and prepare for key milestones. Contact us today for a free consultation to learn more! We can’t wait to help you work towards your goals.