Is my financial advisor pointing me in the right direction?

Financial advisors who act as fiduciaries should have the interest of their clients at the very top of mind. Still, not every financial advisor or wealth planner is built the same. Some may be more experienced to draw from while others may still be learning the ropes. Additionally, not every advisor can communicate in an effective fashion.

When it comes to the finer nuances of a financial plan, an investment nest egg, budgeting, taxation, pension planning, and all the sort, you’re going to need someone who can get the message across in an effective fashion. That’s why it’s a good idea to go “shopping” for a financial advisor that’s a right fit for you.

Indeed, it can be a rather lengthy process and while it’s tempting to take the first advisor that comes knocking, I do think that like with dating, finding the perfect match is critical.

In this piece, we’ll examine a few areas in which people can confirm their advisor is pointing them in the right direction. While some folks may put their full trust in an advisor, it’s only natural to question everything, especially with someone who hasn’t quite earned your trust yet.

Does your advisor act as a fiduciary? Or do they earn a commission on financial products they “sell” to you?

As the saying goes, if you’re not paying for a product, it’s you yourself who may be the product. In the case of financial advisors, I’d encourage people to pay the price to get a fiduciary (an advisor who has your best interests in mind). The advisors you don’t have to pay for advice may desire to help you, but, as always, it’s their interests that are first.

And if they’re directing you towards mutual funds with higher fees than comparable ETFs, your advisor may not be pointing you toward the most efficient passive investment product. Indeed, fund management fees (think 1-2%) may seem low, but in reality, this could amount to a considerable chunk of cash over the long-term.

When it comes to trust, going down the route of a fiduciary is the way to go. Sure, paying a fee for their services may not be ideal, but it may just save you magnitudes more over the long haul if it means going for a low-cost index ETF versus a high-fee mutual fund that an unpaid “free” advisor may get more commission.

Even if you do have a paid fiduciary in your corner, always be ready to ask them questions and ask “why?” so that you can learn how to better communicate with them and understand the full extent of the options they may present you with. Also, it’ll be far easier to know if you’re being pointed in the right direction.

Does your financial advisor offer nuanced perspective?

There’s no one-size-fits-all solution when it comes to personal finance topics. Oftentimes, there are calls that need to be made based on one’s desired lifestyle. For those struggling to find balance between lifestyle and good financial habits, a financial advisor could really offer a nuanced perspective to help one have confidence in their decision.

Of course, you could take to Reddit for similar situations and take the advice of the top-rated comment, but an advisor’s opinion, I believe, can be far more reliable given you have different needs and wants than any given Reddit poster. Indeed, an advisor can really put the personal back into personal finance.

The bottom line

Finding second opinions from another advisor can always be a smart move if you’re not all for an advisor’s commentary, “style,” or recommendation. Arguably, the more opinions and perspectives you open yourself to, the better. Perhaps a fiduciary, a finance-savvy friend, Reddit, and AI can all play a role in the decision-making process as you seek to march on the best path forward for your unique set of circumstances.

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