Hiring a Financial Adviser
This book's goal is to give you the confidence and skills to manage your own money (or, at least, to help you ask better questions). But sometimes it's worth bringing in a professional!
When should you speak with a financial adviser? Here are a few situations that warrant it:
- You've suddenly come into substantially more money than you're used to handling (say, by a factor of ten),
- You're getting married or divorced, and merging or untangling finances, or
- You're starting or selling a business, especially if you're not the only owner.
In short, if you're handling a lot of money and aren't sure what to do, use a bit of it to buy yourself some professional advice.
Finding an adviser
You're looking for a fee-based adviser with a fiduciary duty to you. Let's unpack those terms.
Financial advisers usually make their money in one of two ways.
A fee-based adviser charges a flat hourly rate for advice. Ask some questions, get some answers, maybe have them walk you through a complicated transaction. Nice and simple.
Conversely, a non-fee-based adviser usually manages your money for you and takes a fraction of it annually as their compensation. This is almost certainly not what you want! These fees are often north of 1% of assets under management, which is an outrageous amount of money over time. Furthermore, you've essentially just given all your money to an active manager, which is usually a terrible idea.
Some licensed financial advisers have a fiduciary duty to their clients. This means that they're legally obligated to act in your best interest. This doesn't guarantee they won't make mistakes, of course, but it does ensure that they won't try to sell you shares of their friend's mutual fund (for which, conveniently, they collect a 6% referral fee). This kind of nonsense is, shockingly, legal, unless the adviser is bound as a fiduciary. This is important, so ask, and don't hire them if they're not.
NAPFA maintains a registry of fee-only financial advisers, which may be a useful resource for you.