Choosing a financial advisor will have a huge impact on your financial future for years to come. A recent study indicated that US adults who work with a financial advisor report that they feel substantially greater financial security than those who go it alone. Understanding these three common mistakes when choosing an advisor can prevent years of stress and provide you with peace of mind.
Many people are unfamiliar with the term ‘fiduciary’ and are not even aware of its importance. A financial advisor who is also a fiduciary is ethically bound to act in your best interest. This prevents your advisor from trying to push highly-commissioned products where they are the primary beneficiary. You need to make sure your advisor is providing unbiased advice, and not simply selling you investment products. Dan Murphy is a Certified Financial Planner (CFP) and is held to a fiduciary standard by the CFP Board of Standards. The CFP fiduciary standards apply to a broad scope of financial planning, including retirement, tax, and insurance advice.
It is particularly important to understand exactly how your financial advisor is compensated. Some advisors are ‘fee only’ and charge a flat rate regardless of how they perform on your behalf. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds or other investment products. As mentioned above, this commission-based structure is a serious conflict of interest and you should not work with this type of advisor. At Murphy Wealth Management we receive an agreed upon percentage of assets under management each year – the better you do, the better we do.
For some people, the search for a financial advisor can be an intimidating process. This decision will have long-lasting affect on your financial future. Take the time to interview several advisors before making a decision. Don’t limit yourself to someone just because they are close to where you live. You already know to begin the process by choosing an advisor who is a fiduciary. Don’t hesitate to also ask about their licenses and credentials. Financial advisor’s tests include Series 7, and Series 66 or 65. Some advisors, like Dan Murphy have gone the extra mile and become a Certified Financial Planner. It is also important to feel completely comfortable with your advisor. If you don’t have rapport with the advisor or they are using unclear jargon-filled terms that you don’t understand, it is probably not the right fit for you. When you meet with us at Murphy Wealth, we will encourage you to go home afterwards and think about everything before deciding. Our goal is to create the best possible client-experience – one that builds a life-long relationship.