Millennials are the age demographic that comes after Gen X and before Gen Z, born anytime in the early 1980s to the late 1990s. And if you are doing the math, you know that means they are getting older and approaching, if not having already met, middle age. This means it’s likely time for millennials to pick a financial advisor — if they haven’t already.
But where should they start, particularly if this is the first time they’ve dipped into the dating pool of money management? GOBankingRates spoke with some experts to get their tips and suggestions for how millennials can choose the right financial advisor.
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“There are many situations when you need a financial advisor, such as receiving a significant inheritance, other windfalls or experiencing major life changes, such as starting a family, going through a divorce, having a job loss or approaching retirement,” explained Laura Adams, MBA, an award-winning personal finance author and expert with Finder.com. “They can help you avoid costly mistakes, understand your options and make valuable recommendations based on many factors, including your taxes, risk tolerance and goals.”
Here is how millennials can choose the right financial advisor to fit their needs.
Understand Their Approach and Strategy
Ninety-four percent of Americans indicated they have financial goals, and 80% noted they would meet with a financial advisor to help them reach those goals, according to a recent survey conducted by Citizens.
“However, only 29% … said saving for retirement is a priority. Working in partnership with a financial planner can help you not only prepare for retirement, but also achieve other goals such as investing more, building savings, paying off debt, etc.,” said Nick Campanale, CFP, a private wealth financial planning manager at Citizens Wealth Management.
The first step to building a relationship with a financial advisor is ensuring that trust is the foundation of the relationship.
“This is critically important for millennials because hopefully this individual will serve as a trusted advisor through all of life’s journeys — career changes, family building, buying a home, wealth accumulation, through to retirement and legacy planning and life transitions such as divorce and widowhood,” said Lacy Garcia, the founder and CEO of Willow.
“We do not always know how to best set ourselves up for financial success,” Campanale explained. “This is why getting strong financial advice from a trusted expert is crucial, especially if you want to retire earlier. Since time works in your favor — thanks to compound interest — starting early is crucial. Begin with what you can afford and increase contributions as your financial situation improves.”
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Know How They Get Paid
According to Adams, stockbrokers and some advisors are not fiduciaries and get held only to a standard called “suitability.” They must recommend financial products suitable for a client’s risk tolerance and goals.
“However, a suitable product may be the one that pays the broker the highest commission,” Adams said. “In other words, a suitable product may be okay, but a conflict of interest could prevent you from understanding your options or buying a better product.”
Instead of working with a financial pro who gets paid on commission, Adams recommended considering teaming up with a fee-only advisor.
“They might charge an hourly rate, a percentage of your assets under management (AUM) or a fee to create a financial plan,” Adams said.
Ask For Credentials and Honest Communication
It’s important to know what qualifications and credentials a financial advisor holds to ensure they’re a good fit for you and your needs.
“You can research any advisor’s status and background using the SEC’s Investment Adviser Public Disclosure and FINRA’s BrokerCheck database,” Adams said. “That’s an important step to ensure no disciplinary actions or significant complaints have been filed against them.”
Similarly, Kelly Palmer, the founder and chief wealth officer of The Wealthy Parent, advised millennials to ensure they’re working with an advisor who’s registered with their state or the SEC. “You can search for your advisor by name and learn more about their background on the SEC website,” she said.
But it doesn’t just stop at checking credentials. You should also ensure clear line of communication between you and your advisor to establish a relationship that will be the foundation for your financial future. Because millennials are still in the early or middle stages of their financial journeys, they need to choose someone they can have a strong relationship with for a long time.
“You should feel comfortable talking to your financial advisor and sharing your unique financial goals,” Palmer said. “Know that you don’t need to choose an advisor who looks like your Dad’s golf buddy. If you aren’t comfortable talking about your financial goals with your advisor, this is a red flag.”
Get Reviews and Recommendations
Reviews and recommendations can also be helpful in choosing an advisor.
“You might get a recommendation from friends or family or search online to find the best financial advisor,” Adams said.
Once you have a few advisors in mind, you can learn more about each of them to see who is the best fit.
“Follow them on social media — LinkedIn and Instagram. You can see how they showcase themselves and what type of advisor and person they are,” Garcia said.
“Whether you are searching for a banker, a financial coach or a financial advisor, when it comes to your money and managing it, the buck literally begins and ends with you,” said Saundra Curry, co-founder of BC Holdings of Tennessee.
Interview Your Financial Advisor
Once you think you have found the right advisor, Adams advised that millennials — and really those in any age group — interview their potential advisors and ask the following questions.
- “What types of clients do you typically work with?”
- “What services do you offer?”
- “What are your professional certifications?”
- “How do you make your money?”
- “Are you a fiduciary? Are there times you don’t act as a fiduciary?”
- “Do you have any account minimums?”
- “What is your approach to financial planning?”
- “What information do you need from me to get started?”
- “How many times and how often will we meet?”
- “Are you available if I have questions?”
“Using an expert financial advisor to enhance your money management skills can help you maximize returns, save time, avoid mistakes and stay disciplined to follow a sound financial strategy,” Adams said.
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This article originally appeared on GOBankingRates.com: Millennials: How To Choose the Right Financial Advisor for Your Needs
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
