Rachel Cruze, a money expert, advises people to partner with financial advisors who have the knowledge to help them make better decisions and build wealth properly. She says it’s important to find trusted advisors who focus on what’s best for your situation, not just their own profits. Cruze highlights nine questions to ask when choosing financial advisors.
For real estate agents, she suggests asking how many homes they sold last year, their schedule and availability, and how much commission they get. For tax professionals, Cruze recommends asking how many clients they manage, their experience with complicated finances, and how often they recommend meeting. When it comes to investing professionals, Cruze says to ask how they are compensated, if they understand and honor your goals, and the range of income and assets for their clients.
She believes that by asking these questions, you can find advisors who will work in your best interest and help you navigate financial planning and management. As the world of financial advice continues to broaden, finding a trustworthy advisor can feel like navigating the “Wild West.” Pam Krueger, founder and CEO of Wealthramp, recently shared her insights on this topic. Krueger discussed the differences between fee-only financial advisors, who charge fees directly to clients for their services, and commission-based advisors, who earn money by selling financial products.
She explained that fee-only advisors work only for clients, not for a brokerage firm or insurance company, which can reduce conflicts of interest.
Finding trustworthy financial advisors
Krueger also emphasized the importance of the fiduciary standard, which legally requires advisors to act in their clients’ best interests.
This is different from the suitability standard that brokers are held to, where recommendations must suit the client’s general circumstances but may not align with their best financial interests. According to Krueger, 90% of financial advisors are on the sales side, linked to brokerage firms or insurance companies, while about 60,000 operate as independent fiduciary advisors. Understanding this distinction can help clients find advisors who are more aligned with their financial goals.
New research from Cerulli Associates reveals a disconnect between the satisfaction levels of clients who use financial advisors and the concerns of potential clients regarding cost transparency. The report shows that 55% of advisors consider recruiting new clients to be their biggest challenge. Despite this, satisfaction among existing clients remains high, with 80% of current RIA clients satisfied with their advisors.
However, satisfaction varies based on the clients’ investable assets, with those in the $100,000 to $250,000 range having the lowest satisfaction rate at 70%. The study suggests that advisors need to enhance their transparency and communication strategies to attract prospective clients and address their concerns around costs and services. This could help bridge the gap between the current satisfaction levels of advised clients and the skepticism of those yet to seek financial advice.
Photo by; Kenny Eliason on Unsplash