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Selecting the Right Financial Advisor

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Finance

Recently personal finance blogger extraordinaire Barbara Friedberg wrote this guest post for Happy Simple Living entitled Financial Advisors Who Get Paid To Sell Products Bother Me.  

I couldn’t agree with Barbara more.  While there are of course good advisors who are compensated via commissions, it would seem that an advisor who is compensated in this fashion has a built-in conflict of interest when providing clients with advice.

For tips on selecting a financial planner who is right for you, check out my recent post on the Equifax Personal Finance Blog 10 Questions You Should Ask Before Hiring a Financial Planner – Part 2.  Note there is a link to Part 1 on the post as well.

As Barbara indicated in the title of her post, how an advisor is compensated is critical.  Also critical is whether the advisor acts a in a fiduciary capacity towards their clients.  This in large part determines whether the advisor puts the interests of their clients above all else.

In short, selecting the right financial advisor for you involves asking a lot of questions and understanding how they do business.  Will the advisor put your interests first or will their advice be tainted by the need to sell financial products?

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Comments

  1. Thanks for the mention-One can't post enough on this really important topic.

  2. Thanks for your comment Barb. I agree, the public needs to continue to be reminded about the differences in the types of advisors and advice out there. There are far two many "advisors" who peddle high fee products and worse.

  3. Jason says:

    I'm a Jr. Financial Advisor and I want to pursue a career in fee-based financial planning. Where should I start?

  4. Jason thank you for your comment. First I want to clarify what you are looking to do. Fee-based is basically another form of working on commission in my opinion. Fee-only is what I do and this means that we take no form of compensation from any provider of investments or financial products. If this is your area of interest fee free to contact me and I will be happy to point you to a few places that might be able to help you.

  5. james moylan says:

    I have a web site where I research penny stocks and stocks under ten dollars. I would like to comment about financial planners or investment advisors. I think one is better of being their own investment advisor and if you can't or just are not interested in financial matters than you can just have someone at fidelity investments or some other fund company pick some conservative investments for you.theirs no need to pay a financial planner or investment advisor lots of money for something you could get for free.

  6. James thanks for visiting the site and for sharing your opinion.

  7. I am in the process of hiring a financial planning advisor. The financial planner provided me with several references. What are the best questions to ask these references to help me make the most educated decision about selecting a financial planner?

  8. I am in the process of hiring a financial planning advisor. The financial planner provided me with several references. What are the best questions to ask these references to help me make the most educated decision about selecting a financial planner?

  9. Thanks for your comment. In one respect I think the whole process of asking an advisor for references is a bit flawed in that no advisor is going to give the names of clients who are any less than totally satisfied with his/her services.

    That said, you might inquire about the advisor's communications style. How and how often do they communicate with clients? Are they accessible when you contact them? Do they communicate in a fashion that is understandable to non-financial folks?

  10. Finance Outlook, the complete financial solution.We provide one of a kind innovative financial remedies to all the financial riddles and puzzles that you tumble upon, every moment.

  11. I think one good financial advisor is enough to fulfill the need of a client, if your advisor is good and strategic I suppose one is enough.

  12. Thank you for your comment and for visiting the site.

  13. Hi
    After 25 years in the business, I believe fees and the way financial planners are paid are important along with a host of other factors when selecting a financial planner. I put together a one page financial planner checklist with 'seven questions to ask your financial planner, and one big question for you'. It has been very popular should anyone wish to use it. Cheers

  14. Albertina says:

    I came across your blog just to look, but I had to leave this comment to say how much I appreciate your work. Thanks for the help.

Trackbacks

  1. [...] They claim they were trying to call out bad advisors and toxic practices. In reality their approach was in my opinion a toxic practice. I suggested to them via Twitter that they consider a post discussing the differences between advisors and financial sales people. Perhaps they could educate people on how to determine if working with a financial advisor is right for them and if so how to choose one that fits their needs. [...]

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