How (and why) to Find a Great Financial Advisor

I know what you’re thinking, “I’m 25. I don’t need a financial advisor. I need a hot new boy/girlfriend and maybe a new car.”  While all of the above sound great, I’m going to argue in favor of the financial advisor. Here’s a quick rundown on why you might want one, what a financial advisor can do for you, and how to choose a good one.

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Why Should I Have a Financial Advisor?

  • Because millionaires have one.  For his bestselling book, The Millionaire Next Door, Thomas J. Stanley researched the habits of America’s millionaires to draw out things they did and did not have in common with the rest of us. One of the main differences he found? Most millionaires pay top dollar for good financial advice. (Other differences he found? Millionaires are not caught up in conspicuous consumption, usually don’t drive new cars, and donate a larger percent of their income to charity than the average Joe, but that’s for another post…).
  • Because you don’t have the time (or desire) to learn everything there is to know about personal finance. As much fun as checking out BeyondBeerMoney can be, I’m guessing most of you would prefer spending time at the local town dump to reading the latest tax laws. A personal finance advisor spends all of his or her time learning money strategies. Could you learn the latest in money strategies given enough hours of research? Yes, but by letting someone else do the work you’ll have more time to pursue your passions.
  • Because, if nothing else, having a financial advisor will force you to spend a minimum amount of time thinking about your finances. When you go into your 1st meeting with a personal finance advisor he or she will know how much money you have in the bank, what sorts of investments you have, and what your financial goals are. Even if you’ve never thought about any of the above in your life, my guess is that you’d rather sit down and think them through beforehand than go to a meeting (that you’re paying for!) unprepared and feeling like an idiot. “Uh….bank account. Yeah, I got one of those.” No.

What Will My Financial Advisor Do for Me?

  • Help you see the big picture. Financial advisors are especially useful for recent college graduates who often have no idea what a “good” financial plan looks like. A good financial advisor will spend time looking over your current financial status (including assets, debts, insurance, taxes, and investments) and will help you see what you can do to manage risk and strengthen your current finances.
  • Help you set financial goals. You’ll work with your financial advisor to figure out what your financial goals are (being a millionaire, buying a house, putting kids through college) and how you can work to achieve them.
  • Keep you up to date on the latest finance knowledge. While you’re off saving the world, a good financial advisor will be researching and keeping you up to date on changes in tax laws, new investment strategies, and other ways for you to save and earn more money.

How to Find & Choose an Advisor

  • The best way to find a financial advisor is through a personal referral. While I respect that you can find pretty much anything online, a financial advisor is not one of those things. There are a lot of professional-looking websites advertising financial advisors that are total scams. Ask parents, coworkers and friends (and accountant and attorney if you have them) for their recommendations. The financial guru David Bach recommends you start by asking the wealthiest people you know where they get their financial advice and getting at least 3 different recommendations (i.e. don’t hire the 1st person that’s recommended to you. Ask around). Finding a financial advisor through a referral will also ensure that you get great service. Professionals don’t want to disappoint clients from a strong referral network and risk missing out on future referrals.
  • Treat the 1st meeting like an interview, and you’re the interviewer. Click here for the top 10 questions to ask your advisor.
  • Do your homework. Check out the National Association of Securities Dealers website to find information on your potential advisor’s track record and any disciplinary action taken against him or her.

What Not To Do With A Financial Advisor

  • Accept his or her word as always right. Always do some of your own research and ask questions (better to feel stupid than be broke). If your advisor suggests a new investment, sleep on it and ask friends or colleagues for advice. While a financial advisor can push you in the right direction, the final outcome is in your hands. No one cares more about your money than you do.
  • Stay with someone that isn’t giving you the service or returns that you want. There are plenty of financial advisors out there. If you don’t like what you got, find a new one!

Final Thoughts
Not everyone wants or needs a financial advisor. Similarly, not everyone with an advisor has great finances. That said, for a recent college graduate with little idea how they’re doing financially and what they can do to reach their goals (or, more importantly, what their financial goals might be), doing your research and finding a good financial advisor early can save you lots of money and headaches later on.

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2 Comments

Filed under Financial Mistakes, Financial Resources, Investing

2 responses to “How (and why) to Find a Great Financial Advisor

  1. Pingback: Alternative Financial Advisers | Twenties Money

  2. chad king

    I’m starting my career as a financial adviser at the end of this month and I really enjoyed reading the article. I’d have to say that the article is pretty much spot on.

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