Choosing a financial advisor to help you achieve your financial goals is a big decision. Selecting the right person for the job will impact the experience and success of your journey and will depend on your personal preferences, situation and the financial destination you have in mind. There are also unique things that women investors need to be mindful of while searching for an advisor. Here are five tips to help jump-start the search process.
Working with a financial guide to manage your money and achieve your financial goals isn’t just about dollars and cents. It goes beyond numbers and is often deeply personal. Financial decision-making is complex, and things can get emotional fast since money tends to be tied to emotional constructs like family, security and personal success. The person you choose to be at your side throughout this journey has the potential to become an important confidant in your life. Plus, the entire process is likely to be more fulfilling if you connect with your advisor on a personal level. When speaking with potential advisors, pay close attention to the interpersonal dynamics between the two of you and ask yourself if this is someone you can envision yourself collaborating with on a regular basis—long-term. Is this a person that you can relate to, who speaks your language and is genuinely interested and attuned to your financial needs?
An advisor’s job is to help you stay on track and serve as an accountability partner. Along with the coaching and advice aspect, another important element of this person’s role is financial education. Fifty percent of female investors second-guess their decisions when they don’t have enough information or are pressured into making a decision, according to a study by institutional asset manager, State Street Global Advisors.1 This highlights the importance of finding an advisor who offers ongoing educational opportunities and the right coaching and communication style for you.
For many, investing can seem like a mysterious process that only the Warren Buffets of the world can master. Thankfully that simply isn’t true and understanding how your money is being invested is an important factor in feeling financially empowered and confident. Take the time to learn about each potential advisor’s investment process and financial planning approach. Several studies have shown that women tend to outperform men as investors as they tend to be more focused on the long-term, have higher risk-awareness and orientation toward the big picture rather than short-term results. Adding advisors with long-term, holistic approaches and robust risk management capabilities to your “short list” of candidates may help narrow down your options. There are also challenges that are unique to women that your future advisor should be skilled at addressing. Read about these in our article, Attention Women Investors…Mind the Gap.
Seems like a no-brainer, right? Unfortunately, not everyone that claims to be a financial advisor is required to act in your best interests. You’ve probably heard the terms “DOL” and “SEC” mentioned in conjunction with the term “fiduciary” in the news lately, but what does it mean and why does it matter? Essentially, a Registered Investment Advisor (RIA) acting as a fiduciary is legally required to always put your interests first. When interviewing advisors, ask them if they are a fiduciary and how they define the term. Hopefully, you’ll receive a definitive answer every time.
This is another fairly straightforward area, but it’s critical to understand upfront what an advisor is charging you for the services you’ll receive. Most often advisors have a standard fee schedule for advisory services, which is typically based on the total assets that your advisor is managing for you. A telltale sign of an advisor’s trustworthiness is how transparent they are about their fees. Also ask if they are a fee-based or commission-based. It’s important to know if an advisor is earning a commission on the products they recommend. If they are, they’re probably not beholden to the fiduciary rule and not obligated to act in your best interests since they’re financially incentivized to recommend certain products over others, regardless of whether they’re suited to your needs.
As part of your process in hiring an advisor, you’ll want to get a clear picture of what your working relationship will look like and determine if they have the expertise to best serve your financial needs. Be relentless in your search for the right advisor! We hope that you find, as we have, that working to make your financial goals a reality and investing with purpose can be an incredibly fulfilling experience.