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Choosing a Financial Advisor: An Investor's Checklist

Before you start researching advisors, ask yourself these five questions

Christine Benz 16.08.2017

Why are investors so laissez-faire about finding financial advice? A key reason is that the financial advisory profession is an awfully big and confusing tent. It encompasses people who are focused primarily on investments and those who construct comprehensive financial plans. The good news is that selecting an advisor who's a good fit for your needs doesn't have to be an overwrought process. A lot of guides to choosing an advisor focus on questions you should ask the advisor--compensation schemes, designations, and whether the advisor is a fiduciary. The real first step when seeking an advisor is to think through what you're looking for: your goals in seeking an advisor, what sort of relationship makes sense given those goals, and how much help you expect to need on an ongoing basis, among other issues. Armed with that information, you can then seek advisors who fit your self-made description. Here are the key questions to ask yourself.

Question 1: Are you seeking help with your whole financial life or your investment portfolio?

Many financial advisors--often called investment advisors or wealth managers--devote a lot of time and energy to managing portfolios: determining asset allocation, selecting investments, and so forth. In fact, that may be the one and only thing they will handle for you, or they may tackle non-portfolio aspects of your financial life, but do so only tangentially.

Another big contingent of advisors--financial planners--concern themselves with holistic financial planning: setting and quantifying financial goals, paying down debt, determining insurance needs, and investing appropriately for college and retirement, among other tasks. Financial planners know investments, too, but investment selection and portfolio monitoring aren't all they do.

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About Author

Christine Benz  Christine Benz is Morningstar's director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. Follow Christine on Twitter: @christine_benz and on Facebook.

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