How to Find and Identify the Best Financial Advisors Who Can Deliver on Your Financial Goals
Finding the best financial advisors doesn’t begin with an internet search, or even a friend’s recommendation. The first thing you must do is understand your own beliefs, values, and desires with regard to money, building and protecting wealth, long term planning, and financial security. Once you have done that, you’ll be positioned for finding the best financial advisor for you. The best one for you might not be the best one for your friend. But you won’t know that if you don’t first know what you need and want. If you are an ultra-high net worth individual, we suggest you read our guide on how to find a financial advisor for individuals with over $10 million in liquid assets.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning
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Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
At Pillar Wealth Management, we offer wealth and asset management for individuals with $5 million to $500 million in liquid assets. We can help you figure out how to use your assets to achieve your retirement goals and more. Click here to talk to one of our wealth managers.
What you’re about to read will help you decide if you should get a financial advisor, understand what they can do for you, and know how to find the best one for your situation.
However, if you have high net worth and want to take your search to the next level, you should also read the most authoritative guide ever written on the subject, The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $5 Million to $500 Million in Liquid Assets.
Pillar Wealth Management is an independent wealth advisory firm that serves high net worth and ultra-high net worth clients who have between $5 million and $500 million. We strongly recommend reading that free guide in conjunction with this article.
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Use the following table of contents to read what is most relevant to you.
What Does a Financial Advisor Do?
A good financial advisor helps you plan for the future and secures your financial health and prosperity. The best ones also reduce stress and anxiety about money and retirement, and use a customized process that helps you accomplish what you want most out of life.
They do this by first understanding what you want – your goals and desired lifestyle outcomes. Then, they look at your complete financial picture.
So, what do you have, and where do you want to go with it over the rest of your life? Finally, they create the plan that will help you get there.
That financial planning will usually involve some combination of investments in equities (stocks), bonds, cash savings, and sometimes other options as well.
If you have a business, real estate, company stock options, and pensions, they will incorporate those into the plan.
Their plan will be a recommendation. You get to decide what to do, ultimately. But the best financial advisors, who are also fiduciaries, will create a customized plan that achieves your goals and serves your best interests.
If you go with their plan, most advisors will also manage your investments on your behalf, often through a third-party custodian.
Do I Need a Financial Advisor?
Life only gets more complex for most people. It rarely gets simpler, especially with regard to your finances. And this is true even after you retire.
By that point in life, many people have multiple accounts, pensions, Social Security, Roth IRAs, traditional IRAs, 401ks, health savings accounts, and life insurance. You might also have real estate income and home equity, business income, stock options, and more.
Then, you have heirs, siblings, medical costs, required minimum distributions, and on top of all that, a retirement you’re supposed to enjoy.
A financial advisor helps you enjoy it. Here are seven reasons most people should be using a financial advisor.
- Advisors Help Maintain Healthy Asset Allocation
As you age, your asset allocation must continually be adjusted to serve your short and long term interests. This is not a simple task if you want to do it right. Do it wrong, and you can miss out on big gains you could have been earning.
And, you can suffer outsize losses and introduce avoidable anxiety into what was going to be a peaceful retirement.
The best financial advisors will continually update your portfolio to maintain an optimized asset allocation. Research has found asset allocation to be – by far – the single most important factor in long term financial growth and stability.
To learn more about this, click here to talk to one of our wealth managers.
- Keeps Calm in the Storms
When recessions and volatility arrive, many investors panic – especially high net worth ones because they have so much more to lose.
A good financial advisor will be able to assuage your worries and help you get through the tough times without losing sight of the long term plan. The best advisors will also protect you from suffering unnecessary losses.
- Helps You Through Life Events and Transitions
Major life events can include career switches, business sales, deaths in the family, medical events, inheritances, major purchases, retirement, graduations, divorces – the list is long.
Moments like these shift your financial plans, sometimes in very significant ways. Should you keep contributing the same amount to retirement accounts? Should you change your estate plan? Take a larger or smaller monthly income in retirement? Rent a villa in another country for a year?
Your advisor can help you make smart decisions surrounding events and life transitions like these. They help you see how each decision affects the other things you care about from a financial perspective. 4 strategies for ultra-high net worth families to manage major life events
- Helps You Achieve Your Financial Goals
Managing a portfolio isn’t just about the rate of return. It’s about what you want to do with it. This is why the best financial advisors begin by understanding what you care about, your desired lifestyle outcomes.
Will you have enough to do everything you want to do, before and after retirement, and even after death? An advisor can help ensure you do.
- Delivers a Stable and Enjoyable Retirement
Who wants to spend their retirement worrying about money? You did enough of that while working. Retirement forces many decisions upon you, financially and otherwise.
It also brings deadlines from government requirements, taxes you can either pay in full or minimize, and decisions about what to do with your money after you’re gone.
Retirement isn’t supposed to be stressful, though for many – even high net worth retirees – it often is. The best financial advisors help prevent that from happening.
- Keeps You from Feeling Lost and Overwhelmed
Facing all this alone isn’t easy. Even in most families, there is one person who usually takes the lead on the finances. That person can handle it to a point, but it doesn’t take much for things to spin out of control, beyond their normal ability.
When you add in other stresses of life, sometimes keeping up with all the financial tasks simply becomes too much.
Again, this is particularly true for high net worth and ultra-high net worth households.
- You Don’t Have Time
You can spend your life, and your retirement, managing all your financial decisions and investments, or you can spend that time doing things you enjoy and leave all that stuff to professionals.
Probably the single best reason to get a financial advisor is because you simply don’t have time for all this. That’s why many investors get into hot water at some point.
Not because of irresponsibility, or even lack of knowledge. They simply don’t have time to do everything that needs to be done. They can’t keep up.
With a good financial advisor, everything that needs to get done will get done. And with the best advisors, it will get done better than you could have done it, even if you did have time.
If you have high net worth, here are 3 more reasons to get a financial advisor.
How Much Money Do You Need to Hire a Financial Advisor?
It depends on the advisor. Most financial advisors require some kind of a minimum balance. For all the work they do, it simply wouldn’t make sense for them to work with someone who has only a few thousand dollars.
For people in that situation, robo-advisors or self-management through big investment companies are better options.
As a general rule of thumb, when your various accounts start reaching into the six-figure range, that’s when you have enough to start looking for a financial advisor.
Is It Worth Having a Financial Advisor?
Here’s a bold statement: After your spouse and your kids, your financial advisor is the most important person in your life.
Think about what this person does. They help you manage your money for decades, through your prime working years and retirement. They are the difference between peace of mind, what we call ‘financial serenity’, and uncertainty, anxiety, and overwhelm. The best financial advisors make that great of an impact in your life.
For all that can go wrong and can derail your finances, having lifelong peace of mind is well worth paying 1% per year. That is, by the way, the most common fee charged by fee-only advisors who don’t also charge commissions or other hidden costs.
Can I Trust a Financial Advisor?
There are some scam artists out there. But the truth is, as long as you stick with professionals, you don’t need to worry about that too much.
As long as an advisor is a Registered Investment Advisor (RIA) with the Securities and Exchange Commission, or a certified financial planner, you won’t have to worry about getting scammed. You can verify their certifications on the SEC website.
The real question, when it comes to trust, is about competence, not honesty.
A person can be sincere in their beliefs, but be sincerely wrong. And a financial advisor can have the best intentions and the purest heart in the world, but still be clueless.
The interesting thing is, incompetence isn’t confined to financial advisors with no experience. Even the supposed experts make terrible financial and investment decisions. Here’s a story of bad advice given by a financial advisor.
For a more high profile example of the failures of so-called experts, here’s a story of a company on the verge of an IPO that suddenly lost 75% of its valuation, and all the fallout it brought about.
You’ll see some really startling stuff if you get into the details surrounding that deal. For instance, Softbank invested over $70 billion in 88 startups over a four year period. After four years, the entire portfolio was worth about $77 billion.
So, because we’re talking about tens of billions of dollars, you know who’s involved in these sort of deals. Major players in Wall Street, banking, and venture capital.
People who “know,” one would think. And yet, after investing historic, epic amounts of money, they have returned a total growth rate of 10%. And that’s over four years. So it’s under 3% per year.
Are we supposed to be impressed?
You see – trust isn’t about getting scammed nearly as much as it’s about getting duped. You get scammed by a criminal. You get duped by someone who you assume has more skill than they actually do.
So – can you trust a financial advisor?
Yes, but that person needs to be able to show you – in great detail – how they will achieve the financial security and lifestyle outcomes you desire. They need to have a plan that is backed by hard historical data, not guesses and projections.
They need an objective process that removes human emotion from the key decisions – including the advisor’s emotions.
See how Pillar Wealth Management achieves this for our clients in this free guide, Improving Portfolio Performance, the Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity.
What Is the Difference between a Financial Planner and a Financial Advisor?
The truth is, there’s not a huge difference, because both perform many of the same tasks. But in general, ‘financial advisor’ is a broader term covering many others, and ‘financial planner’ is one type of advisor. Other types include investment managers and wealth managers.
Financial planners focus more on creating customized plans for specific situations. Financial advisors help their clients make financial decisions, and help them put plans into practice by managing and guiding their investments.
Should I Choose an Online Financial Planning Service or In-Person Financial Planner?
There are pros and cons to both. With online, you can engage with your financial advisor from anywhere. This means you’ll have a much wider selection of advisors to choose from, and can pick the best financial advisor no matter where they are based.
There are some benefits to working with an advisor in person, but with technology, most of those are less distinct than they used to be. You can do online video meetings that achieve just about all the same advantages of an in-person meeting, and without any health risks.
Here’s a more in-depth comparison of using a local advisor or the best advisor you can find, regardless of location.
What it really comes down to is, who has the best service, the most expertise, and the highest level of customized financial planning? That’s the advisor you want to work with.
How do you identify that person though? One way is to understand what elite-level financial planning looks like, and how different that is from much of what’s out there.
This is why we so strongly recommend our free guide, The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $10 Million to $500 Million in Liquid Assets.
Though it has been written for affluent investors who fit into our net worth requirement, the guide will be just as useful for anyone looking for any type of financial advisor. These are universal principles.
Who Are the Best Investment Companies in the US?
The best financial advisors in the U.S. will nearly always be independent fiduciaries running their own private businesses. Among those, you want to look for ones who have developed their own customized financial planning process.
To really get anywhere, you have to talk to a few advisors. If you’ve done your homework like reading our free guide and using other resources on this site, you’ll know what to look for and how to determine if this advisor is a good choice for you. Keep reading for some of those resources.
How Do I Find the Best Financial Advisors Near Me?
Again, location doesn’t matter that much for most people, so let’s focus on how to find the best financial advisors, period.
First, as mentioned earlier, you must know yourself and your own beliefs about money, as well as your current financial situation. Here are seven questions to help discover that.
- How long until I retire?
People retire at different ages. Some people never retire, by choice; they just change the nature of their work. As you age, your financial needs will change.
After you retire, they will change a lot. Some financial advisors specialize in retirement financial planning, and they will design their service around when you plan to retire, and what needs to happen after that.
- How do I like to manage money?
Do you like the hands-on or hands-off approach? Meaning, do you like to be involved in all the decisions, consider the pros and cons of your various choices, and take an active role in the process? Or do you want to let someone else take care of everything so you can go enjoy life?
This is partly a control issue, which when it comes to money, isn’t necessarily a bad thing. If you have a hard time letting go, you’ll need an advisor who can work with that.
- How much wealth do I have?
Add everything up and find out how much you have in liquid assets. This includes retirement accounts. It does not include pensions, which are fixed payments. Once you add it up, you can look for financial advisors who serve clients with your net worth.
- How often do I need communication?
Do you want regular updates every week, every month, every quarter? Is once a year enough? This again is partly about control. Those who want more control tend to want more frequent updates.
Another aspect of communication is if you want an advisor who takes initiative to call you when something comes up that affects you. For instance, suppose the capital gains or estate tax laws get changed. Do you expect your advisor to proactively call you to discuss how these changes affect you?
In that case, you are probably looking for a wealth manager instead of a financial advisor. Wealth managers like Pillar put more effort into building the relationship with their clients and delivering a concierge-style service. This is one reason we tend to have fewer clients.
- Am I pretty comfortable with investing?
Everyone has values and beliefs about money. Are you conservative, preferring savings accounts, bonds, CDs, and conservative investments? Are you on the other extreme, lured by the promises of day trading, futures and options, venture capital, and hedge funds? Or, are you somewhere in the middle?
What produces more joy for you? Spending, giving, saving, or using money to achieve your goals and desires? Some combination of these?
How do you view debt? Do you think long term financially, like 20 years out? Or do you think in shorter time frames?
For investment planning and managing money, what a financial advisor would do with these various clients will look very different. And in some cases, an advisor will only work with people who answer these questions in certain ways.
Pillar, for instance, will not work with someone who wants to do day trading and high-risk bets. That’s not how you build long term financial security and experience financial serenity – which is what we pledge to deliver for our clients. So, we turn down clients who prefer that approach to investing.
There’s nothing wrong with it. We just believe that aiming for financial serenity over performance can make a big difference and ensure our client’s peace of mind. To learn more about this, click here to read our guide on the 5 critical shifts for achieving portfolio growth.
- What is my life and work situation?
Size and age of family affects your financial planning. Is college still on the horizon for your kids? There are tools and methods for funding things like that.
Beyond this, how much do you plan on financially supporting your kids? Some high net worth and ultra-high net worth families give regular payments to their kids. Others give none and want them to figure out financial responsibility on their own.
Do you have a business? Do you have real estate properties that produce income? You can look for financial advisors who have extra skill and experience in these areas.
- Do I need any additional financial services?
As wealth increases, so does the need for services. This again distinguishes wealth managers from normal financial advisors.
Pillar offers help with estate planning, college 529 planning, tax minimization and strategic planning, insurance planning, and many other services that matter a great deal to ultra-high net worth families.
In our case, we offer all these extra services at no extra charge. They are part of our standard service for all our clients. Other wealth managers may charge extra for some of these.
Why extra services? Because protecting your wealth is as important as growing your wealth, once you start reaching higher levels of affluence. If you have ultra-high net worth,
you would do very well for yourself to read our definitive work on the subject of wealth protection: The Art of Protecting Ultra-High Net Worth Portfolios and Estates, Strategies for Families worth $25 Million to $500 Million. Order a free hardcover copy today.
Look for the Best Financial Advisor
With your own situation, values, and needs clarified, now you can begin your search armed with much more awareness.
Your first criteria should be to insist on working with independent fiduciary financial advisors. It is difficult to overstate how vitally important this is.
Most of the horror stories out there happen with advisors who do not have one or both of these distinctions. The reason is because non-fiduciaries tend to be looking for ways to increase their income too, not just your portfolio.
They see you as a source of potential revenue. See 6 benefits of working with independent fiduciary advisors
Second, as mentioned earlier, there’s nothing helpful about an incompetent fiduciary, so you need to get a clear understanding of their financial planning process.
How do they customize their plans to fit your life, your needs, and your desired lifestyle? How do they protect you from big losses without missing out on big gains?
Can they explain this to you?
That is ultimately what you’re looking for.
For high net worth and ultra-high net worth investors, here are 4 additional steps you can take in searching for the best wealth manager for you.
Once you’ve found an advisor you think seems like a good choice, go in to your first meeting with the following ten questions in hand:
- What is your minimum asset requirement?
- How long have you been a wealth manager?
- How long do your clients stay with you on average?
- Are you a fiduciary?
- What is your philosophy about active vs passive management?
- What do you do to minimize my costs?
- How often do you update my financial plan?
- Do you believe you can outperform the market?
- When I call with a question, who will I be talking to?
- How can you help me feel secure that my money won’t run out?
For question two, the more money you have, the more experience you would like to see. Wealth management is not something we would entrust to someone who just graduated or just got certified. They simply won’t have the breadth and depth of understanding and awareness that someone with ultra-high net worth will expect.
Pillar has 30 years of wealth management experience.
For question five, you’re looking for an advisor who understands that active management rarely outperforms the market. You want someone who isn’t deluded into thinking they have found the secrets for doing so.
Active management generally means the financial advisor buys and sells equities, bonds, and commodities based on their own research and understanding, and tries to beat the market.
Some do this with individual company stocks. Others use pooled funds managed by others at big investment companies like Schwab and Fidelity.
An advisor who relies on active management for the majority of their strategy is one you should avoid. In case they don’t quite give you a clear answer on this, question eight will ensure you get what you need to know.
The ‘correct’ answer to question eight is “No.” Hopefully, they would also agree that hardly anyone outperforms the market year after year, and we don’t build plans with that as the goal. It’s the wrong goal.
For more on these ten questions and the answers you want, see this article.
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