1. Hiring an advisor who is not a fiduciary: By definition, a fiduciary is an individual who is ethically bound to act in another person’s best interest. This obligation eliminates conflict of interest concerns and makes an advisors advice more trustworthy.
At WestCal Reverse, we take a fiduciary approach to reverse mortgages. Your advisor should do the same with investment advice.
2. Hiring the first Advisor you meet: While it’s tempting to hire the advisor closest to your home of the first advisor in the yellow pages, this decision requires more time. Get recommendations from other trusted professionals, like us at WestCal. Take the time to interview at least a few advisors before picking the best match for you.
3. Choosing an advisor with the wrong specialty: Some financial advisors specialize in retirement planning, while others are best for business owners of those with a high net worth. Some might be best for young professionals starting a family. Be sure to understand an advisors strengths and weaknesses—before signing the dotted line.
4. Picking 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. Not asking 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 of Series 65. Some advisors go a step further and become a Certified Financial Planner, or CFP.
6. Not understanding how they get 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, which may cause a conflict. If the advisor earns more by ignoring your best interests, you may want to consider others instead.
7. Trying to hire an adviser on your own: Chances are there are several highly qualified advisors in your area or nearby your zip code. However it can seem daunting to choose one. One way is to ask other trusted advisors in your life, such as your attorney, CPA or mortgage specialist, for a recommendation. Today there are many online tools that can also narrow down your choices. One online company, Smartasset.com, can be a clearinghouse for information about advisors and related information.
You are encouraged to call our office anytime you need financial advice, assistance or recommendations to other vetted professionals. We look forward to the opportunity to be of service to you.
Marc has 36 years in financial services and 6 years in teaching.
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