Did you know anyone can call themselves a financial advisor?
Or a financial planner, a wealth manager, an investment manager… the list goes on and on.
Believe it or not, these titles have no legal or regulatory meaning. They’re not evidence of experience or education. They’re just marketing tools.
In fact, you could call yourself a wealth manager right now if you wanted!
That’s just one reason why finding a trained, experienced, and legitimate financial advisor who works in your best interest at all times and won’t sell you and products is tough.
The professionals who do a great job are out there. But they’re hard to spot amongst salespeople and agents who work on commission and aren’t legally required to put your interests ahead of their own.
It sounds crazy, but that’s how the industry is currently set up. So it falls on us to understand what to look for when we hire a financial planner — and what mistakes to avoid.
How to Listen to Today’s Episode:
- 10 Biggest Mistakes to Avoid When Hiring a Financial Planner [Free PDF Guide]
- The Bumpy Road to Outperformance [Vanguard Research]
- Morningstar Website to Locate Your Expense Ratios
10 Mistakes to Avoid When Hiring a Financial Advisor
If you want to get a head start on the podcast, here are 5 of the 10 biggest mistakes you will want to steer clear of:
Mistake #1: Hiring an Advisor Who’s Not a Fiduciary All the Time
One of the most important questions that you can ask any financial professional is, “are you a fiduciary?”
In fact, you should avoid working with any advisor who isn’t a fiduciary. This word means that they’re required — by law — to put your interests ahead of their own.
A fiduciary puts your interests first.
Unfortunately, it’s not always as easy asking the question and getting a “yes” answer. The problem? Some financial advisors act as a fiduciary… sometimes.
There may be times when they operate as a fiduciary. But they might also take that hat off and put on another that holds them to what’s known as the “suitability” standard.
Suitability means they only need to prove that a product is suitable for you. They don’t need to take into consideration fees, quality, or expected investment return of their recommendation.
When advisors work under the suitability standard, it’s possible they’re earning a commission for selling you a product. This should be disclosed to you, but the method of compensation can create massive conflicts of interest.
Just about every big brokerage firm you know by name operates under this suitability standard. Sometimes they act as a fiduciary, but not all the time.
You can get crystal clear on whether or not an advisor will work with you as a fiduciary at all times by requesting they sign a fiduciary oath on your behalf. If they refuse to sign, keep looking for someone else to provide financial advice.
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About Taylor Schulte
I'm a CERTIFIED FINANCIAL PLANNER™ professional in San Diego and the founder & CEO of Define Financial. When I’m not perfecting financial plans, you can find me traveling with my wife and two sons (Sawyer & Sutton), searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.
talking into a