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Avoid These Mistakes When Choosing a Financial Advisor

Picture of Randall E. White

Randall E. White

choosing financial advisor mistakes

The decision to hire a financial advisor is a significant one. It’s a recognition that you’re ready to take control of your financial future, and it’s a decision that will dictate much of your financial strategy for years to come. In short, it’s a consequential move that you should never make lightly.

Below, I’ll review six common pitfalls to avoid when selecting your financial advisor.

1. Hiring the First Financial Advisor You Meet With

Just like professionals in any industry, financial advisors fall across a broad spectrum. So, it’s hard to get a feel for your options if you simply choose the first financial advisor you talk to. Remember, this is the person you’re trusting with a plan to secure and grow your wealth, and you’ll want to make a thoughtful choice. The well-known financial advisor a few blocks away may be convenient, but is convenience all you’re looking for?

It’s tempting to make a selection quickly so you can move forward with your planning, but this decision requires more than cursory consideration. In fact, I recommend that you meet with at least three advisors before making your selection. This way, you can compare, ask questions, and get a feel for each advisor’s communication style.

2. Choosing a Financial Advisor Who is Not a Fiduciary

In the financial advice industry, there are varying professional standards for advisors to adhere to. The strictest of these is the fiduciary standard because a fiduciary financial advisor has a legal obligation to act in your best interest. This standard creates trust and means that you don’t need to worry about conflicts of interest as your advisor builds your financial plan.


3. Choosing Against Your Preferred Strategy

One of the major pieces of your financial plan is your investment portfolio, and you will undoubtedly receive guidance from your financial advisor. It’s crucial that the advisor’s strategy aligns with your needs and preferences. A good example is risk tolerance, which is an important component in your investment strategy. It’s also a highly individual preference. You may be a cautious investor and prefer to tip your portfolio toward less volatile investments, like bonds. In that case, you don’t want to work with an advisor who favors an aggressive stock approach for all clients. Your financial advisor should be willing to strategize around your needs and preferences with regard to investing and every other part of your financial plan.

4. Neglecting to Verify Credentials

The strategic decisions you and your financial advisor make could have life-changing consequences for your future. That’s why it is critical to ask potential advisors about their credentials. For instance, you can ask which tests they have passed, such as the Series 7, the Series 66, or the Series 65. You can also ask which licenses they have been awarded and which financial advisor credentials they have earned. Many financial advisors take their education and credentials to the next level by becoming a CFP® (Certified Financial Planner). However, you should never just take their word for it. You can (and should!) verify CFP® credentials here.


5. Lacking an Understanding of Fee Structure

Financial advisor fee structures vary. Some offer fee-only services at a flat rate, while others may take a percentage of all your assets under management. There are also advisors who earn a commission directly from selling you financial products or mutual funds – which can represent a significant conflict of interest. Be sure you understand the fee structure of any financial advisor you’re considering and keep an eye on the long-term. Over time, fees could greatly impact your overall nest egg and your family’s financial security.

6. Failing to Listen to Your Intuition

You could easily meet with more than one financial advisor who holds the highest certifications, offers many years of experience, and gets great client reviews, too. On paper, they might appear to be excellent choices. However, it’s important to listen to your intuition, too. Think about your meetings. Did each financial advisor answer your questions fully and patiently? Did you feel they truly understood your goals? Did your gut tell you they were genuine and trustworthy individuals? If there are potential advisors on your list about whom you have nagging doubts for any reason, cross them off and keep looking. You should have one hundred percent confidence in the financial advisor you choose, regardless of what they look like on paper.

Are You Ready to Hire a Financial Advisor?

At TriCapital, we are fiduciary financial advisors focused on serving our clients through every phase of life. If you’d like to learn more about our services and philosophy, please schedule a conversation with us today so we can share more about The TriCapital Difference. We look forward to speaking with you!

Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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