Working with a financial advisor is a good way to increase your chances of meeting your money-related goals. In fact, Americans who work with advisors are more likely to feel financially secure than those who don't. But not all financial advisors are created equal, so if you're going to hire someone to manage your money, you want to get that decision right. Here are a few major mistakes you'll need to avoid when seeking out the right person to guide you financially.

1. Not asking for referrals

You'd ask a neighbor for the name of a solid home contractor, and you'd ask a friend to recommend a pediatrician. So why wouldn't you seek referrals in your search for a financial advisor? By soliciting endorsements, you'll increase your chances of finding someone trustworthy, so one of your first steps in finding an advisor should be to see who the people you know are satisfied with.

Man in suit at laptop sitting next to woman on couch, shaking hands with man in suit, with charts spread out on table in front of them.


2. Not finding someone who acts as a fiduciary

A financial advisor who acts as a fiduciary must always put his or her clients' best interests first. Many advisors, however, merely conform to the suitability standard, which means that their only obligation is to recommend investments that technically are a reasonable fit for you. Those investments, however, won't necessarily be the most cost-effective, which is why not seeking out a fiduciary could end up being a very expensive mistake.

3. Not inquiring about fees

Financial advisors have to get paid, and usually, they earn money either via commissions or as a percentage of assets under management. The latter arrangement is usually preferable for two reasons: first, because your advisor won't be tempted to recommend bum investments just to get paid, and second, because your advisor's earnings from your account will be linked to its performance. No matter which setup you choose, make sure you understand what fees you'll be charged, and don't hesitate to comparison-shop. An advisor who charges an annual fee of 1.5% of assets under management will cost you more than one who charges 1%.

4. Not vetting credentials

You wouldn't put your health in the hands of someone without a medical license, so the same should hold true for your money -- you want an advisor who's certified to give financial advice. Therefore, be sure to ask about an advisor's credentials before deciding whether to pursue an official relationship. Generally, you'll want someone who's a CFP (certified financial planner) or CFA (chartered financial analyst). These credentials aren't easily earned -- they require a lot of coursework and the passing of exams, which means that if you hire an advisor who has these letters attached to his or her name, you know that advisor has put in the time.

Working with a financial advisor is a smart move, provided you choose the right person for the job. Be sure to avoid the above mistakes when seeking out a financial advisor, and if you're currently working with someone you're not satisfied with, don't hesitate to make a switch. Remember, it's your money at stake, and you can't afford to leave it in the hands of just anyone.