7 Mistakes People Make When Choosing a Financial Advisor

Choosing a financial advisor is one of the most important financial decisions you’ll ever make. The right advisor can help you build wealth, plan for retirement, and secure your financial future. But choosing the wrong one can lead to poor investment choices, unnecessary fees, and even financial losses. Here are seven common mistakes people make when selecting a financial advisor—and how to avoid them.

1. Not Checking Credentials and Qualifications

Many people assume that anyone calling themselves a financial advisor is qualified to manage their money. However, not all advisors have the same level of education, training, or certifications. Look for designations like Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), or Chartered Financial Consultant (ChFC®)—these indicate that the advisor has undergone rigorous training and adheres to ethical standards.

2. Ignoring Fee Structures

Advisors can be paid in different ways: fee-only, commission-based, or a combination of both. Fee-only advisors charge a flat fee or a percentage of assets under management (AUM), while commission-based advisors earn money from selling financial products. Some commission-based advisors may have conflicts of interest, recommending products that earn them the highest commissions rather than what’s best for you. Always ask how your advisor gets paid.

3. Not Understanding Fiduciary Duty

A fiduciary financial advisor is legally obligated to act in your best interest. However, not all advisors are fiduciaries—some operate under a "suitability standard," meaning they only have to recommend investments that are suitable, not necessarily the best option for you. Always ask if an advisor is a fiduciary and get their response in writing.

4. Failing to Assess Experience and Specialization

Financial advisors specialize in different areas—some focus on retirement planning, others on estate planning, taxes, or investment management. If you’re a business owner, you may need an advisor experienced in business succession planning. If you’re nearing retirement, look for someone who specializes in retirement income strategies. Make sure your advisor’s expertise aligns with your financial needs.

5. Overlooking Transparency and Communication

A good financial advisor should be transparent about fees, investment strategies, and potential risks. They should also be available when you need them. If an advisor is vague about how they manage your money or hard to reach, that’s a red flag. Ask about their communication style—will they meet with you quarterly? Annually? Will they be available when you have urgent questions?

6. Not Checking References and Reviews

Would you hire an employee without checking their references? The same logic applies when choosing a financial advisor. Ask for client testimonials, read online reviews, and check with regulatory bodies like FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure database. If an advisor has complaints or disciplinary actions, steer clear.

7. Choosing Based on Personality Instead of Expertise

It’s important to like and trust your advisor, but that shouldn’t be the only reason you choose them. Some advisors are charismatic and great salespeople, but that doesn’t mean they’re the best at managing money. Make sure your decision is based on qualifications, experience, and transparency—not just a friendly personality.

Final Thoughts

Finding the right financial advisor requires research, due diligence, and asking the right questions. By avoiding these seven mistakes, you can find a trustworthy, competent professional who will help you achieve your financial goals.