How to tell if your financial adviser is doing a good job? (2024)

How to tell if your financial adviser is doing a good job?

Your risk tolerance and time horizon should be important factors that your advisor uses to create your investment portfolio. Your advisor must bring value. They may or may not be able to beat the market, and if they consistently can't, then they probably aren't doing that good of job.

Your risk tolerance and time horizon should be important factors that your advisor uses to create your investment portfolio. Your advisor must bring value. They may or may not be able to beat the market, and if they consistently can't, then they probably aren't doing that good of job.

If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find one willing to go the extra mile to work with you, serve your best interests and to keep you as a client.

They should be responsive, willing to explain financial concepts, and keep the client's best interest at heart. If not, you should look for a new advisor. It's also fine to approach a financial advisor when you're feeling financially secure, but you want someone to ensure that you're on the right track.

You can check our Financial Services Register (FS Register) to make sure a firm or individual is authorised. It will also tell you the activities the firm has permission for. Search for the firm by name, or by using its firm reference number (FRN).

Ask how their service works. For instance, whether they offer once-off or ongoing advice. Request an outline of their fees and if they'll provide a quote for the advice before completing any work. It's also a good idea to ask how they're paid – whether they're salary-based, fee-for-service, or incentivised by bonuses.

There are several warning signs that your financial advisor may be ripping you off, including high fees, hidden costs, and a lack of transparency. If you have concerns, it's important to speak up and ask questions.

If you're having trouble picking up the phone to ask a financial question, that's a bad sign. “If you're not calling because you don't think your concerns are important, or you feel like, 'they're too busy — I don't want to bother them,' those are big red flags,” Jennerjohn says.

How do you know you can trust a financial advisor?

check that the adviser you are seeing is qualified to give you the advice you need. take notes so that you have a clear record of what was said at the meeting. ask lots of questions and make sure you understand everything you are told. take time to think about any decisions or to compare products with another adviser.

Very generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could also be higher, such as $500,000, $1 million or even more.

While the typical annual financial advisor fee is thought to be 1%, according to a 2023 study by Advisory HQ, the average financial advisor fee is 0.59% to 1.18% per year. However, rates typically decrease the more money you invest.

It might come as a surprise, but your financial professional—whether they're a banker, planner or advisor—wants to know more about you than how much money you can invest. They can best help you achieve your goals when they know more about your job, your family and your passions.

Using Reviews to Evaluate a Financial Advisor

When you're evaluating a financial advisor, you'll want to understand the services they offer, how they're compensated, any financial certifications they hold, and their background and industry experience.

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

How do you validate a financial advisor?

To Search for a Licensed Investment Advisor:

You can use FINRA's BrokerCheck database to research the background and experience of financial brokers, advisers and firms. You also can check if an investment adviser is registered with the SEC.

Conventional wisdom suggests that you should not tip these professionals. I would say it depends. Suppose your financial advisor gave you a great tip and you made lots of money in the stock market this year.

Without knowing the full scope of services delivered by the advisor, 2% may be too expensive for a portfolio of your size and for a relationship in which tax advice is not provided. This immediate, high-level evaluation is based on benchmarks for typical advisory fees, which we'll dive into shortly.

You should meet with your advisor at least once a year to reassess basics like budget, taxes and investment performance. This is the time to discuss whether you feel you are on the right track, and if there is something you could be doing better to increase your net worth in the coming 12 months.

Bottom Line. On average, financial advisors charge between 0.59% and 1.18% of assets under management for their asset management. At 1%, an advisor's fee is well within the industry average.