4 Big Mistakes People Make Hiring A Financial Advisor

Copyright (c) 2010 Brian Fricke

I get a lot of calls and emails from people who aren't happy with their investments – people who were led in a certain direction by a financial advisor, only to learn later on they didn't have all the information they needed to choose the best financial advisor for them.

The fact is, there are a lot of people out there calling themselves financial advisors, but sometimes you end up with a wolf in sheep's clothing. So I'm going to share with you a few things you want to be careful of before you trust someone with your money.

1. Interviewing or talking to just one advisor or one potential advisor. If you've never hired a financial advisor before or never worked with a stock broker or anybody in the world of finance, making a decision after talking to just one person could be very harmful to your situation. And the reason I say that is you don't have a reference of comparison. The first person you meet could be, quite frankly, a complete idiot — but could certainly sound like a great advisor to you simply because you don't have a comparison to establish a true opinion. So bottom line: you always want to talk to several different advisors so you can sniff out the good ones from the not-so-good ones.

2. Not doing a background or a reference check. I see this all the time. "Gee, I heard this guy on the radio. He must be good." Or, "He's quoted in the newspaper all the time. He must be good." Or even, "He wrote a book. So of course he's good." That could be a huge, huge mistake. Right now there's a multitude of so-called financial, talk-radio, ask the expert shows. What you probably don't know is that most of these so-called experts are on the air simply because they're paying the radio station for the air time! The same goes for books. I have written a book, 'Worry Free Retirement' – but I actually wrote the book! Did you know there are companies who will make any adfvisor an 'instant author'? The advisor pays a fee to claim authorship of an already written book! At best, they maybe wrote the preface, but the rest of the content in the book was written by someone else. So don't get lulled into a false sense of security just because someone "appears" to be an expert.

3. Putting your entire focus on cost. If you hear somebody say, "Buy this investment, you pay nothing. The mutual fund, the annuity, the insurance company pays me, you don't pay me anything," my advice to you is to run for the hills. The buyer always pays, there is no free lunch. Where do you think the money comes from for these companies to pay to the advisor?

4. Getting "wowed" by credentials or designations. In the world of financial planners, there are a multitude of designations. Some of which, quite frankly, you get by just paying a couple of hundred bucks, taking an online, open book test and maybe investing a couple of hours. Meaning a fancy credential, doesn't necessarily qualify them or mean they've got what it takes to deliver the goods.

First and foremost look, for a Certified Financial Planner. But that doesn't mean you stop there, because quite frankly there are some not-so-good Certified Financial Planners. So do your due diligence. You need to find somebody that doesn't just have the credentials that can deliver the goods, but that you just feel right about. I call it a personal chemistry – but whatever you want to call it, don't be afraid to shop around. After all, it's your moneyand your lifestyle that will be affected, for better or worse!