3 Mistakes People Make When Hiring Financial Advisors

As your wealth grows, financial decisions may become increasingly more complex.

For investors with seven-figure portfolios, selecting a financial advisor to work with can be an important decision that could potentially influence taxes, income and legacy planning, and more long-term financial considerations for decades to come.

Yet even affluent individuals are capable of making subtle, but potentially consequential, mistakes when choosing an advisor.

Our free advisor matching tool can help match you with a fiduciary financial advisor who serves your area in just a few minutes.

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3 Mistakes to Avoid When Selecting a Financial Advisor

1. Working With an Advisor Who Is Not a Fiduciary

Not all financial advisors are created equal.

Some advisors operate under suitability standards, while others may receive compensation tied to specific products, which can introduce potential conflicts of interest.

As asset levels increase, conflicts of interest may have a greater potential impact on long-term planning decisions, particularly those involving taxes, income strategies, and portfolio construction.

It can be important to confirm whether an advisor acts as a fiduciary and how that obligation applies when providing investment advice.

Our free matching tool only matches investors with fiduciary advisors. Click here to get started.

2. Not Fully Understanding How an Advisor Is Paid

Advisory fees can vary widely: fee-only, fee-based, commission-based, or combinations of these structures are common.

Without clarity, investors may have difficulty understanding how compensation structures relate to the advice they may receive.

Over time, fees and expenses can potentially minimize after-tax returns and influence retirement income planning and estate considerations.

It may be helpful to request a clear explanation of advisory compensation, including management fees and other associated costs before committing to working with an advisor.

3. Choosing an Advisor Without the Right Expertise

Not all advisors specialize in high-net-worth planning, which may require more specialized planning considerations and expertise

Some advisors may focus primarily on accumulation strategies and may have more limited experience with advanced planning considerations, while others may cater exclusively to high-net-worth investors.

Investors may want to consider whether an advisor has experience working with clients who have similar financial situations and planning goals.

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Why This Is Important for Investors Seeking Financial Advice

Choosing a financial advisor can be an important decision for many investors.

Taking time to review fiduciary status, compensation structure, and relevant experience may help investors make more informed decisions.

In fact, SmartAsset’s latest proprietary model reveals that working with a financial advisor could potentially add from 36% to 212% more dollar value to investors’ portfolios over a lifetime, depending on multiple unique, individual factors.¹

With thousands of advisors in the US, it can seem daunting to choose one.

SmartAsset's no-cost tool can help. Just answer a few simple questions and you'll be matched in minutes with vetted fiduciary financial advisors who serve your area, bound to work in your best interests.

It's never too late to plan to work toward a comfortable retirement. Explore your advisor matches today.

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This is a hypothetical example and is not representative of any specific security. Actual results when working with a financial advisor will vary.

This scenario is for illustrative purposes only and does not represent an actual client. Results may vary.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.

SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.

SmartAsset Advisors, LLC ("SmartAsset"), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset receives compensation from Advisers for our services. SmartAsset does not review the ongoing performance of any Adviser, participate in the management of any user’s account by an Adviser or provide advice regarding specific investments.

We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.

Sources:

1. “The Value of a Financial Advisor: What’s It Really Worth?” SmartAsset (Nov. 2024)