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Image shows a client shaking the hand of a financial advisor. Interviewing potential advisors is imperative when hiring a financial advisor.

There are lots of facets of your money management that you can take care of personally, using your own research and skill and with the help of comprehensive online tools and calculators. But if you’re ready to take it a step further and get some insight from the expertise of a professional financial advisor, be sure to be clear about your goals and careful about asking specific questions every step of the way.

Step 1: Identify Your Financial Goals

Before asking someone to help you, you’ll need to understand what you yourself need from your finances.

What is it that you need or want to do with your money or have your money do for you? The answer to this question may be more forward-looking or may be based on recent circumstances. Have you experienced a recent life event or events such as a new job, a move, death in the family, inheritance, birth of a family member, etc.? Are you nearing retirement or interested in estate planning? Do you want to speak to someone about investing?

If the answers to all of these questions are not 100% clear, it’s still important to make a list. That way you can ask potential advisors about their general insight on these matters, and use what they say to help you make a decision about who to eventually hire.

Even if you’re only affected by one of these things, it’s important to understand too that you may still need an advisor’s help further along down the line. Doing your research now can help you stay informed – and ideally save time and money in the long run.

Step 2: Do Your Research

Image shows a laptop as well as a notepad with research notes written on it. Thorough research is important to complete when hiring a financial advisor.

Information is key to making the financial decisions that best benefit you and your situation. Based on internet searches, reading a firm’s website and asking around trusted friends and family who may already work with a financial advisor, you’ll want to gather some of the following information:

  • Services – There are many types services that advisors offer, including retirement planning, estate planning and investment advisory services to name a few.
  • Fees – Depending on the types of services you receive, fees will play an important part in your eventual hire. Many advisors will charge hourly or by project for certain types of consulting and will often offer investment advisory services according to a fee schedule at the firm where they work. Make sure you understand the different costs this may mean for you and also whether the advisor uses a fee-only or a fee-based structure.
  • Investment philosophy – Different firms operate and advise clients based on different investment philosophies and goals. These are sometimes dictated based on the types of clients they serve, so be sure to understand whether you’re eligible to be a client in the first place. This may help you narrow your list down further.
  • Certifications – Does this particular advisor or do advisors at this firm have professional certifications that signify their expertise and training?
  • Disclosures and complaints – Governmental and regulatory agencies such as the Securities and Exchange Commission (SEC) require disclosures in order to promote transparency and fairness. Be sure to find out whether the advisor follows the fiduciary standard.

Step 3: Interview Advisors and Compare Notes

The next step is to set up interviews with the list of potential advisors you’ve narrowed down. You can ask them about their experience, how they understand the philosophy of the firm and whether they feel their services and firm are right for your situation as a client.

Make sure to get clear information from the advisors themselves on what fees and payment schedules would look like if you move forward. There are many additional fees and expenses that clients have to incur, so understanding what exactly you’re responsible now for could help you be prepared later.

Step 4: Hire an Advisor and Review Your Plan

Once you choose a particular firm and advisor to work with, you’ll finalize an agreement with them. Be sure to read the fine print of the terms of the contract and make sure it addresses your financial goals.

Review your financial plan with your advisor. Keep them apprised about any changes to your financial situation, risk tolerance, time horizon, liquidity needs, long term goals and investment preferences.

Step 5: Check In on a Regular Basis

Make sure you stay in contact with your advisor on a regular basis and have a clear sense of your money situation from the updates you receive from them. If necessary, ask whether it might be possible to adjust your plan or strategy depending on any major changes in your personal situation. Remember that fees and fee structures may change over time as well, so staying informed about that is imperative as you continue your client-advisor relationship.

Bottom Line

Image shows two people reviewing a written contract that sits on a desk between them. Asking the right questions and being clear about fees and services is important when hiring a financial advisor.

Hiring a financial advisor might be a long and thorough process, but doing your research and asking the right questions at the outset can make a world of difference once you actually choose an advisor and lock in an agreement. Before making a decision, be sure to be up front with your own needs, shop around and interview potential advisors to understand how they charge fees and interact with their clientele.

Tips for Making Smarter Financial Decisions

  • If you’re not ready for a financial advisor yet but need to get a better hold on your own finances, start by making sure you’re on top of your budget. Our free budget calculator can help you do just that.
  • Consider speaking to a professional advisor to see how they might be able to help you. Connecting to a financial advisor doesn’t have to be hard. SmartAsset’s free tool can connect you with advisors in just five minutes. If you’re ready to be matched, get started now.

Photo credit: ©iStock.com/seb_ra, ©iStock.com/pablohart, ©iStock.com/scyther5

Nadia Ahmad, CEPF® Nadia Ahmad is a Certified Educator in Personal Finance (CEPF®) and a member of the Society for Advancing Business Editing and Writing (SABEW). Her interest in taxes and grammar makes writing about personal finance a perfect fit! Nadia has spent ten years working as a seasonal income tax assistant, researching federal, state and local tax code and assisting in preparing tax returns. Nadia has a degree in English and American Literature from New York University and has served as an instructor/facilitator for a variety of writing workshops in the NYC area.
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