Choosing a Financial Advisor: Play Ball!

Do I need a financial advisor? And if I do, how do I choose one that best fits my needs?

These questions are perhaps the most frequently asked about money management and financial planning, and the answers can have huge implications for your financial future. With baseball season upon us, I’ll use a bunch of baseball metaphors. Forgive me in advance!

Let’s address the first question, right off the bat. The question isn’t so much “Do I need a financial advisor?” but rather “How can a financial advisor help me?” A financial advisor is a little like a baseball team’s hitting coach. This person’s primary objective is to work with you to improve your approach at the plate—not to tell you to swing at any individual pitch.

A financial advisor will excel at helping you reduce your debt, finding ways you can save money for a stated purpose or retirement, and help guide your overall financial decision making. A financial advisor is not the person to call if you have bought a new car (although this professional may be able to help you uncover ways to make the payments). The purpose of the financial advisor is to work with each client to establish them on the best path possible to reach their financial goals (that is, not necessarily win an individual game, but finish the season in the best possible position).

In 2020, Northwestern Mutual conducted a survey of U.S. adults and found that 71% admitted they needed to improve their financial planning. Yet only 29% of American adults utilize the services of a financial advisor. It sounds like we’re leaving a lot of runners in scoring position!

OK, once you’ve decided that you’d like to speak to a financial advisor, we’ve identified 5 of the most common errors in making this decision.

1. Choosing an Advisor Who Doesn’t Act in Your Best Interest

If the pitcher was betting against his team to win, that pitcher may not produce his best effort to shut out the opponent. Good financial advisors will act as a fiduciary: they are ethically bound to act in your best interest. This means avoiding any potential conflicts of interest that could adversely affect your own interests. Isakov Planning Group advisors are first and foremost, dedicated fiduciaries for all their clients.

2. Hiring the First Advisor You Meet

When a baseball player seeks a new agent, that person will interview many candidates before choosing one. The decision to hire a financial advisor should be deliberate and considered, and should seek to understand which professional’s approach and attitude best aligns with your own. At Isakov Planning Group, we are also looking for a good fit with a customer—we don’t agree to work with every person who wants to engage us. We want you to be comfortable with our approach, and we want to feel like we can help each of our clients.

3. Failing to Ask for and Checking Their Credentials

Not everyone can serve as a financial advisor. It requires training, testing, and certification. Each qualified financial advisor should have certifications that include Series 7 or Series 66 (or perhaps Series 65). Some advisors take the advanced step of seeking a Certified Financial Planner or CFP title. Isakov Planning Group has only CFPs on staff, the highest level of certification. A website called BrokerCheck allows visitors to search the name of an advisor or firm and view their credentials.

4. Choosing an Advisor Whose Strategy May Make You Uncomfortable

Like baseball managers who want players to hit early in the count or try to get into favorable 2-0 counts, not all financial advisors have similar investment strategies. If a financial advisor prefers stock-heavy portfolios and you are more comfortable with bonds and index funds, this may signal the time to bring in a reliever.

5. Failing to Inquire How Your Financial Advisor Makes Money

Financial advisors can be paid in several ways. Some may receive a flat rate that does not vary regardless of your portfolio’s performance. Others will receive a set fee based on the size of the assets they are managing. Others are paid by commissions from mutual funds, which is likely a conflict of interest. If the latter, they are not a fiduciary; find someone else!

 

At Isakov Planning Group, we seek clients who have done their homework, and are ready to step to the plate. Contact us now for a free consultation, to see if we would be good teammates!