Protect Yourself Hiring a New Financial Advisor (2024)

FAQs

Protect Yourself Hiring a New Financial Advisor? ›

Make sure they are a Certified Financial Planner (CFP). Even if they say they have the certification, if you feel suspicious for whatever reason, you can always call the CFP Board of Standards to verify that they are certified.

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

Potential negatives of working with a Financial Advisor include costs/fees, quality, and potential abandonment. This can easily be a positive as much as it can be a negative. The key is to make sure you get what your pay for.

Legally, switching financial advisors is pretty straightforward: Sign an agreement with your new firm, and notify your old advisor. However, there may be some financial ramifications. Check your old advisor's contract to see if there is a termination fee, which you'll need to pay.

Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Are you paying too much to your financial adviser? Many financial advisers charge based on how much money they manage on your behalf, and 1% of your total assets under management is a pretty standard fee. But psst: If you have over $1 million, a flat fee might make a lot more financial sense for you, pros say.

Red Flag #1: They're not a fiduciary.

You be surprised to learn that not all financial advisors act in their clients' best interest. In fact, only financial advisors that hold themselves to a fiduciary standard of care must legally put your interests ahead of theirs.

At what point is it worth getting a financial advisor? ›

Key points

Consider hiring an advisor if your finances are complex or you experience a major life event. Choose an advisor you feel comfortable with and whose expertise aligns with your needs.

Limited availability: Financial advisors may not be available at all times, which can be a problem if you need urgent advice or assistance. Risk of scams: unfortunately, there is a risk of financial scams in the industry, and it's important to be aware of this risk when working with a financial advisor.

Not everyone needs a financial advisor, especially since it's an additional cost. But having the extra help and advice can be paramount in reaching financial goals, especially if you're feeling stuck or unsure of how to get there.

If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find one willing to go the extra mile to work with you, serve your best interests and to keep you as a client.

Thank them for their service, and let them know you are going a different direction. They may ask why, but they probably already know the answer to that question. If you feel comfortable in letting them know why, go ahead and tell them.

In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee.

Depending on the net worth advisor you choose, you generally should consider hiring an advisor when you have between $50,000 - $1,000,000, but most prefer to start working with clients when they have between $100,000 - $500,000 in liquid assets.

Consider hiring an advisor if your finances are complex or you experience a major life event. Choose an advisor you feel comfortable with and whose expertise aligns with your needs.

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.