Another day, another million-dollar celebrity is claiming poverty because they entrusted their wealth to financial advisors who turned out to be shady. From Lindsay Lohan to Shia LeBeouf, lots of celebs have lost lots of money due to various issues, often including money mismanagement. Most recently, award-winning actor Al Pacino admitted that due to a combination of living large and a financial advisor who mismanaged his funds, he was essentially broke by his 70s.
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Find Out: Why Skipping a financial advisor Could Be Your Biggest Money Mistake
While coming into a lot of money itself can lead to overspending, there are solid ways to find a reputable financial advisor who won’t send you down a path of poverty.
Christopher Stroup, a financial advisor and owner of Silicon Beach Financial, offered five tips for hiring a reliable financial planner who will help you grow your wealth, not squander it.
They Should Have Proper Certification
It’s very important to make sure your financial advisor is a certified financial planner (CFP) or holds another reputable credential like a chartered financial analyst (CFA), Stroup said. “This ensures they have the proper training, experience, and ethical standards to guide your financial journey.”
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You Should Vet Their Experience
Solid financial experience, however, develops through more than just a credential. Stroup recommended you “understand the advisor’s history to see if they’ve worked with clients in similar financial situations or industries.”
If you need to ask for references of their long-term clients to verify their success, this shouldn’t be a problem for a legitimate planner. “A financial planner with a proven track record is more likely to guide you in the right direction financially,” Stroup said.
Reluctance to give information about their background could be a red flag.
Seek a Clear Fee Structure
If you don’t know how much a financial planner or advisor charges, that’s a problem — there could be hidden fees or shady billing practices. Making sure you understand how they’re paid also avoids conflicts of interest, Stroup said.
“Some planners charge a flat fee, while others take a percentage of assets under management or earn commissions on financial products they recommend,” Stroup said. “Transparent, fee-only planners are often the most trustworthy.”
Make Sure They Support Risk Management
A good financial advisor will not only help you grow your wealth, but they’ll also ensure you’re adequately managing risks, such as tax implications, market volatility and unforeseen emergencies, Stroup explained. “It’s important to be cautious of planners who promise overly high returns or make unrealistic predictions. If it sounds too good to be true, it likely is.”
Expect Good Communication
Financial planning is a long-term relationship, Stroup pointed out, which means that it’s important to ensure that you feel comfortable with their communication style. “Are they responsive? Do they explain concepts clearly? A good financial advisor should listen to your goals, concerns and values while collaborating with you in a way that makes you feel empowered and informed.”
A good financial planner is a relationship that might last longer than some marriages, so just like you wouldn’t in your personal life, don’t take chances in your financial life, either.
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This article originally appeared on GOBankingRates.com: Don’t Go Broke Like These Celebs: Tips for Hiring a Reliable Financial Planner
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