There are some things you should not do when selecting a Financial advisor to represent your financial interests.

Hiring a Financial Advisor is a great way to ensure you make the best choices with your money. Unfortunately, hiring the wrong financial advisor can have the opposite effect and hurt you in the long run.

We contacted some financial advisors to ask them what they think are the worst mistakes people make when hiring a financial advisor.

1. Not Understanding Scope

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John Stoj, founder of flat fee RIA Verbatim Financial, says, “The biggest mistake people make when hiring a financial advisor is the earliest. Many people decide to hire a financial advisor before they know why they want one. Then, one or two, or even ten years later, they’re disappointed. Some people want advisors to mainly manage their investments. Other people want in depth, ongoing financial planning. Either or both are fine reasons to hire a financial advisor. Without knowing which you want, it’s doubtful you’ll find the right long term advisor/client match.”

Kevin Burke, Owner/Financial Planner at HCP Wealth Planning adds, ” One of the most common mistakes people make when hiring an advisor is to not fully understand exactly what the advisor’s services include and what to expect out of their client experience.  It’s important to know if the advisor is only interested in managing your investments, or if they include a planning process that addresses the other areas of your financial life such as taxes, insurance, cash flow planning, and estate planning.”

3. Not Hiring a Fiduciary

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Chris Chen, CFP, Insight Financial Strategists, says, “The first {mistake people make} is to not hire a fiduciary. It is hard because everyone says that they are these days. Unfortunately, it requires the client to dig a little bit deeper. The one giveaway is if the financial advisor gets compensation from commissions or other rebates. When they do they have inherent conflict of interest which will make it really hard to be a fiduciary. And, no, disclosure of the conflict is not enough. After all we are human, and even when we don’t want to we cannot help but be biased in favor of what’s in our best interest. ”

3. Going With a Family Recommendation

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Stephanie W. McCullough, Sofia Financial,  says, “One of the big mistakes I see is going with a recommendation you receive from a friend or family member. Just because the advisor is right for that person, doesn’t mean they’re right for you! Step One is always to get as clear as possible on what you want the professional to do for you – then go find advisors who do that thing. Your friend may have needed investment management, but what you really want is help figuring out what your finances will look like after you get divorced. Those are two different needs, and may well be best addressed by two different advisors!

There are lots of advisors who specialize in serving clients with specific needs, or in a certain demographic. The general public isn’t necessarily aware of that. It pays to do some research – and don’t limit yourself to advisors in your local area. Most of us can serve clients anywhere in the US, so broaden your search geographically, and narrow it functionally.”

4. Not Picking a Fee-Only Advisor

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Brian Behl, CFP®, CRPC® Behl Wealth Management, says one of the biggest mistakes people make is Not picking a Fee-Only advisor. He says, “Fee-Only means the advisor is only paid by their client, either for financial planning fees or investment management.  They don’t receive any sort of commissions or kickbacks for selling certain products like insurance or annuities. ”

5. Not Checking Credentials and Qualifications

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Christopher Berry, Castle Wealth Group, says, “One of the most common mistakes is failing to thoroughly research a financial advisor’s credentials and qualifications. It’s essential to ensure that the advisor is properly licensed and has the necessary certifications, such as Certified Financial Planner (CFP). Many individuals claim to be financial experts without the appropriate qualifications, which can lead to poor financial advice.”

6. Not Understanding What a Financial Advisor Is

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Lisa Whitley, AFC®, CRPC® MoneyByLisa LLC, says, “The phrase “financial advisor” is a marketing term; it can mean almost anything from someone who manages investments to someone who sells insurance (or both). And just as you would not go to a podiatrist for a heart condition, different advisors have different areas of expertise. The key to unraveling it all is being very clear in your own mind about what you want from a professional relationship. Someone to offer investment advice? Someone to actually take the reins and implement investment moves on your behalf? Someone to review your tax situation? Help you find your way out of debt? Is your principal concern managing your money in retirement? Or are you an entrepreneur with a growing business? Once you know what you are shopping for, it is much easier to look past the title “financial advisor” and find the person with the experience, skill set, and business type best suited for you.”

7. Choosing an Advisor Who Does Not Lead With a Paid Financial Planning Relationship

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Eric Amzalag, CFP ®, RICP®  Peak Financial Planning, says, “Most advisors will require an asset transfer in order to begin the advisory relationship. This is because (if they do not charge a fee for financial planning) the advisor is only paid if they manage assets for the client. This creates a mal-incentive where the client has to take a huge leap of faith in order to get advice they would be gated from and transfer assets to someone they do not know well, nor do they know if they are qualified. Working with an advisor that leads with financial planning offers a “try before you jump off the cliff” opportunity for the consumer to “test the advisor’s knowledge” before making the riskiest decision of their life (transferring assets).”

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