Top 3 Mistakes People Make When Choosing a Financial Advisor


Choosing a financial advisor is an important step in your financial journey.

Here are the top three mistakes people make when choosing a financial advisor and what they can do to make sure they are making the right choice.

Not Checking Experience and Credentials

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Determine the three main financial planning goals you wish to focus on with an advisor. During your introductory call, ask if they can help you with those items and ask how they would address each goal. This is critical as every advisor has different strengths and experiences.

There are very different needs, such as creating a budget, helping you save on taxes, developing a plan for your equity compensation, and educating you on Medicare plans. Choose an advisor with a strong track record in the specific areas of finance that you need help with.

Ask who their clients are today. If you are approaching retirement and want to know when to start Social Security and how to position your investments for retirement, you may not be the best fit for an advisor who primarily works with millennials. Alternatively, if you prefer to DIY your financial plan and just need someone to manage your investments, you may be better suited to work with a money manager.

Last, ask for and verify their credentials. Look for an advisor who is a CERTIFIED FINANCIAL PLANNER™ professional. They are the gold standard of financial advisors and prioritize your interests over their own.

Not Asking About the Fee Structure

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Some people may not fully understand how financial advisors are compensated because we are like doctors. We have different specialties and work for different institutions. Some of the fee structures can lead to conflicts of interest. Advisors

may be commission-based, fee-based, or fee-only, and each model has its implications.

During your introductory call, ask how the advisor is compensated. Ask them to describe the difference between their fee structure and one of the others listed above. You should feel comfortable with their response. For the record, fee-only advisors typically have fewer conflicts of interest.

Not Assessing Communication and Compatibility

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Working with a financial advisor is the most intimate relationship you will ever have with a professional. Revealing your finances to a stranger requires deep vulnerability and trust. You want to ensure that they are a good listener, that they respond to your questions in a manner you can understand, and that you can connect with them on a personal level. You don’t have to be best friends, but the more comfortable you are sharing your fears, doubts, and concerns, the better the advisor can assist and comfort you. For example, I identify as a lesbian and have a number of LGBTQIA+ clients. A level of comfort, familiarity, and respect bolsters the level of trust with my clients.

Try to meet the advisor in person or via Zoom during your initial consultation. This will help you better understand the advisor’s communication style and ensure they are interested in understanding and aligning with your financial goals.

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Author: Alleson Tate, CFP


Alleson Tate, CFP® is the Founder of Avere Wealth Management, an independent Registered Investment Advisory (RIA) firm based in Atlanta, GA specializing in wealth building and tax reduction strategies for business owners.

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