Financial Advisors
How To Find a Financial Advisor: 5 Tips To Find the Best Fit for You
Finding a financial advisor that puts your interests before their own isn’t easy. Many financial advisors are more like salespeople, and make most of their money from selling products that earn commissions rather than helping clients do what is best with their money. More Americans get financial advice from social media and friends and family than they do from financial professionals, even though financial advisors are consistently rated the most trusted source for financial advice.
One of the reasons why many Americans don’t work with an advisor is because it is so difficult to find an advisor that is right for you. Here’s how to find an advisor that is a good fit for you and your financial needs.
1. Look for a fee-only financial advisor.
There are many different ways financial advisors can get paid, but at Aberdour Investments we believe fee-only financial advisors prioritize the needs of their clients and are the least-conflicted type of advisor. Fee-only advisors only get paid by charging for the services they provide to clients. They do not earn commissions from selling products to their clients. Conflicts of interest will still exist, but are disclosed to the client.
An example of a conflict of interest that may exist for a fee-only advisor is an assets under management (AUM) advisor recommending a client prioritize investing over paying off their mortgage. The financial advisor in this scenario would make more money if the client chose to invest instead of paying off their debt, and that conflict of interest would need to be clearly disclosed to the client.
Fee-based financial advisors receive some of their income from fees paid by clients, but may receive some or most of their compensation through selling products to their clients. Fee-based financial advisors have a clear conflict of interest; if they are trying to choose which product to recommend to their client, and one will pay them a much larger commission than the other, will they be able to choose what is best for the client if it affects how much money they make? It is extremely difficult for fee-based advisors to overcome this conflict and work in the best interest of their clients.
Commission-based financial advisors do not charge clients for their services directly. Instead, they make money from the products the client invests in or purchases. The main draw of commission-based advisors is that they are “free” and the cost of their services are often hidden and not transparent. Nothing is truly free, and the cost of working with a commission-based financial advisor could be substantial if you are buying and investing in inferior products.
2. Work with an advisor that has experience working with clients like you.
Ask any financial advisor you are considering working with what their typical client looks like. If all of an advisor’s clients are retired or nearing retirement, and you are a high-income tech employee in your 30s, they may not be a good fit for you. Everyone’s financial situation is different, and if an advisor has experience working with clients in situations that resemble your own, they may be a much better fit.
3. Make sure the advisor’s philosophy on finance and investing aligns with yours.
Financial advisors often have different philosophies on investing and personal finance, and you should seek out someone whose philosophy closely aligns with your own. If you are a more risk-averse individual, you should find an advisor that can structure a portfolio that satisfies your appetite for risk while accounting for how much risk you need to take to meet your financial goals.
4. Don’t hire someone that promises to “beat the market.”
Any advisor that promises to “beat the market” should immediately send up red flags in your head. Trying to time the movements of the stock market is most often a losing battle. The data shows that only 13% of professional fund managers of large cap funds were able to outperform the S&P 500 over the last 10 years. Active funds are much less tax-efficient than index funds since fund managers are trying to time and beat the market. After adjusting for taxes, only 2% of large-cap active funds have outperformed the S&P 500 over the last 10 years.
5. Make sure they offer all the services you need.
Financial advisors may only offer certain services to their clients, but a great financial advisor can help you with every area of personal finance you have concerns about. If you are older, retirement planning may be the biggest priority. If you have kids in high school, planning for college might be top of mind. If you are concerned your accounts aren’t structured in a very tax-efficient way, tax planning may be most important to you. No matter what services you require, make sure your financial advisor can fulfill all of your needs.
How to find a financial advisor for global families
International families have unique needs. Whether you moved to the United States from a different country or are an expat living abroad, understanding the financial intricacies of an entirely new county can be intimidating or overwhelming. That’s where a financial advisor like Aberdour Investments comes in. I know first-hand how difficult adjusting to a new country can be and love working with clients of all different backgrounds to create the financial life they desire.
Fee-only financial advisors in St. Paul, Minnesota
Aberdour Investments is a fee-only financial advisor in St. Paul, Minnesota that focuses on helping clients discover their financial goals and values, creating and executing a plan to meet those goals, and adapting to changes along the way. We offer a complimentary meeting or phone call to explore the benefits of working together. As a fiduciary, fee-only advisor, I believe in putting my clients’ interests before my own and do not sell any products to make a living. If you are interested in working together, send a message and I will be in touch.