6 Mistakes People Make When Choosing A Financial Advisor - Sound Income Strategies (2024)

FAQs

6 Mistakes People Make When Choosing A Financial Advisor - Sound Income Strategies? ›

Choose a financial advisor who listens to your concerns and responds to your questions. Listening is an important part of any relationship, but it's especially important in the context of finding a financial advisor. As with other relationships, you'll need to establish rapport with your financial advisor.

Choose a financial advisor who listens to your concerns and responds to your questions. Listening is an important part of any relationship, but it's especially important in the context of finding a financial advisor. As with other relationships, you'll need to establish rapport with your financial advisor.

It suggests 80% of an outcome is often the result of just 20% of the effort you put into it. Often, by prioritizing the 20% of your efforts that make the biggest splash, you can reduce excess commotion. In that spirit, here are 3 financial best practices that pack a lot of value per “pound” of effort.

An advisor who believes in having a long-term relationship with you—and not merely a series of commission-generating transactions—can be considered trustworthy. Ask for referrals and then run a background check on the advisors that you narrow down such as from FINRA's free BrokerCheck service.

The top personality traits of financial advisors are extraversion and openness. Financial advisors score highly on extraversion, meaning that they rely on external stimuli to be happy, such as people or exciting surroundings.

What is better than a financial advisor? ›

A financial planner can make more sense if you want a deeper analysis of specific components of your finances or desire a well-rounded, long-term plan. For example, if you want to strategically buy stocks and other assets to help you achieve long-term goals, a financial planner might be better equipped to help.

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.

Deep Analytical Ability

A competent financial advisor can help clients with cash flow retirement, investment, insurance, estate, and tax planning. Having in-depth analytical ability across all these areas is essential, but it is most important in the investing portion.

Commissions. In this type of fee arrangement, a financial advisor makes their money from commissions. Advisors earn these fees when they recommend and sell specific financial products, such as mutual funds or annuities, to a client. These are often payable in addition to the above client fees.

Bottom Line. On average, financial advisors charge between 0.59% and 1.18% of assets under management for their asset management. At 1%, an advisor's fee is well within the industry average.

While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.