Why not getting financial advice can be costly and 7 mistakes to avoid
When facing crucial financial choices, seek expert advice to avoid potential financial losses and save time.
A financial advisor offers advice by looking at your circumstances and future goals when thinking about what you should do or before recommending a product.
Financial guidance is usually free and identifies your options but does not make recommendations.
If you’re looking for a financial advisor, you should ensure they are regulated by the US Securities and Exchange Commission (SEC).
When a financial advisor can help
There are many occasions when a financial advisor can help, including:
Saving for or buying a house
Starting or reviewing your pension
Starting a family
Starting or running a business
Planning for retirement and exploring income options
Arranging long-term care
Finding the right financial product, such as insurance or a pension
So, if you’re thinking of doing any of the above, getting financial advice is a good idea.
A financial advisor can recommend investments and retirement saving options that can potentially save you thousands in the long run, as well as help you save more effectively.
While financial advice is invaluable, there are some pitfalls you should avoid.
7 mistakes to avoid when getting financial advice
Here are some of the most common mistakes to watch out for when looking for a financial advisor.
1. Not being prepared
Planning your dream retirement, want to start investing, or save for your own home?
It’s vital that you have an idea about what you want your financial advisor to help you with.
Unbiased matches you with an advisor for your individual needs, and your first initial meeting is free, so you can make sure they are right for you before making a decision.
For example, if you’re looking into investments and the advisor focuses on assets that don’t align with your risk profile or strategy, it’s worth considering if they are the right fit for you.
It’s also advisable to ask whether your advisor will review your circumstances regularly, as well as any investments, to make sure you’re still on the right track for your goals.
Struggling to prepare for your first meeting? Here are 11 questions you should ask your financial advisor when you first sit down to discuss your finances.
2. Not doing your research or getting references
It’s a good idea to have a look at reviews of any financial advisor you’re considering to discover other people’s experiences.
You could also ask your financial advisor for any references from existing clients to see what kind of service they have received.
This should be taken with a grain of salt as the advisor will choose who you can contact.
3. Choosing an advisor based solely on a recommendation from family or friends
While talking to family and friends about money is positive, choosing a financial advisor based solely on their recommendation can be a big mistake.
The advisor may have offered high-quality advice and recommendations on that occasion, but they might not specialize in what you need help with.
Once you meet with an advisor, check whether they can help you with your financial goals, their qualifications, fees, and how they’ll work with you.
4. Not choosing an SEC-regulated advisor
A SEC-regulated financial advisor has to follow certain rules when dealing with clients.
A good financial advisor will be happy to discuss their qualifications and how they can help you.
If you want peace of mind, Unbiased has a network of financial advisors that are all SEC-regulated and will get in touch with you when you use our matching service.
5. Choosing an advisor that doesn’t match your needs
A financial advisor may specialize in certain areas such as pensions or mortgages and should discuss their expertise and how they’ll work with you in your initial meeting.
It goes without saying, but it’s not advisable to choose an advisor that specializes in mortgages if you’re looking for someone to advise you on your retirement or investments.
6. Not understanding the fees
It’s hard to pinpoint the exact amount you’ll need to pay for financial advice as this depends on what help you need, but good advice should cost less than no advice at all.
Your financial advisor may charge a fixed fee, a percentage of the assets under management, or an hourly rate.
In your initial meeting, you should get written confirmation on what fees to expect and an estimate of how long the work will take.
7. Not asking questions
As you’ll be trusting a financial advisor with your assets and financial future, don’t be afraid to ask any questions that come to mind.
For example, how do the fees work? Are there any tax benefits or will there by any tax implications if I invest with you?
If you don’t understand anything, including the benefits or drawbacks, it’s best to get clarity before signing on the dotted line.
Senior Content Writer
Lisa-Marie Voneshen is a Senior Content Writer at Unbiased. She is an award-winning journalist with nearly a decade of experience writing and editing content across various areas, including personal finance and investing.