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7 Rules Smart Professionals Use to Choose Financial Advisors


1. Always Hire an Advisor Who Is a Fiduciary
By definition, a fiduciary is an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and disclose any potential conflicts of interest to clients.

2. Don't Hire the First Advisor You Meet
While it’s tempting to hire the advisor closest to home or the first advisor in the yellow pages, this decision requires more time. Take the time to interview at least a few advisors before picking the best match for you.


3. Don't Choose an Advisor with the Wrong Specialty
Some financial advisors specialize in retirement planning, while others are best for business owners or those with a high net worth. Some might be best for young professionals starting a family. Be sure to understand an advisor’s strengths and weaknesses - before signing the dotted line.

4. Don't Pick an Advisor With an Incompatible Strategy
Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.


5. Always Ask About Credentials
To give investment advice, financial advisors are required to pass a test. Ask your advisor about their licenses, tests, and credentials. Financial advisors tests include the Series 7, and Series 66 or Series 65. Some advisors go a step further and become a Certified Financial Planner, or CFP.

6. Understand How They are Paid
Some advisors are "fee only" and charge you a flat rate no matter what. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds, a serious conflict of interest. If the advisor earns more by ignoring your best interests, do not hire them.

7. Hire a Vetted Advisor
Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.