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You’ll find plenty of lists of the best financial advisors, and no doubt it’s tempting to hire one of them. Who doesn’t want a financial leg up, after all? But here’s the thing: Best doesn’t mean best for you. “What’s right for your neighbor may not be right for you,” says Grace S. Yung, managing director of Midtown Financial Group. And adds, Sara Rathner, personal finance expert at NerdWallet: “Depending on what you’re looking for, [best] might mean good investment returns, an accountability partner that helps you stay on track to meet money goals, or someone to help you work through unhealthy money behaviors.” (This tool can help you get matched with a planner who meets your needs.)
Here’s what to consider as you sort through best advisor lists, and recommendations of great advisors from friends and family.
Past success doesn’t mean future success
If an advisor has a great couple of years, picking the hot stocks and ditching the duds, they may very well land on a best list, or get recommended to you by a friend. But remember this: Most money pros don’t consistently beat the market, as you can read here. Plus, a lot of an advisor’s performance will be individual to a client’s needs: Some clients want rapid growth, others want to play it safe, so you should look beyond just those metrics.
Best can sometimes mean expensive
Advisors who get a ton of accolades may charge their clients accordingly. And research shows that high fees eat into client returns. Even a fee of 1% of assets under management, which is pretty standard, can be a significant hit to a client, compared to say a .25% fee. As MarketWatch recently reported: “If you invested $100,000, a 1% annual fee might reduce your portfolio value by $30,000 over 20 years, compared to a .25% annual fee, the SEC notes.”
It’s a lot about whether the advisor is a good fit for your needs and goals
The most important thing is to work with someone who you feel comfortable with and who you think understands what your needs and goals are. “Ask them about their processes so you can get a good understanding and so you can weigh whether or not the way they work will help you with your financial journey,” says Yung. “Both parties need to have a natural good fit, otherwise the relationship will have a hard time succeeding,” says Yung. (This tool can help you get matched with a planner who meets your needs.)
Trust and comfort is essential
Sara Rathner, personal finance expert at NerdWallet, says because you talk about deeply personal stuff with your financial advisor, they’re often one of a handful of people who know when you get fired, undergo fertility treatments or contemplate leaving your spouse. “That’s why it’s crucial to find someone who you not only trust, but feel comfortable confiding in,” says Rathner.
CFP Board Ambassador Jeanne Fisher also notes that trust and empathy are key to having a successful advising relationship. “Those two can’t be achieved if your personalities don’t match well,” says Fisher. You may want to make sure your communication styles mesh well, that your values are aligned and more.
Does the advisor actually listen to you?
Acknowledging whether you feel heard is an important thing to consider, even when a financial advisor has notoriety for being the best. “Do you feel as though the advisor truly understands and respects your opinions and feelings? Also, do you leave the conversation feeling at ease and with a clear understanding of what was discussed? If you fit well with your advisor, you won’t feel confused or uneasy at the end of a meeting,” says Fisher. (This tool can help you get matched with a planner who meets your needs.)