Be diligent when choosing someone to manage your money.

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Decisions made by a financial advisor can make the difference between being a retired millionaire and not. But when choosing a financial advisor, experts say that many people make costly mistakes. Here are some of the most common. (Use this tool to be matched with a planner that meets your needs.)

Mistake # 1: You Didn’t Ask Your Financial Advisor How had been paid

“As a general rule, it’s best to work with fee-based advisors who will charge you either a fixed percentage of your assets under management or a flat rate for their services. If you work with an advisor who earns a commission on various investment products, that’s a red flag, ”says Ismat Mangla, senior director of content at LendingTree. Some fee-only planners charge an hourly or annual fee, but the most common is that they charge a percentage of assets under management, which means the advisor deducts their fees directly from the client’s account, based on the account balance.

Note that a paid and paid planner is not the same, as MarketWatch Picks: plan explains here, like saving for a rainy day. A paid planner gets paid only on what you pay them for their time, strategy, and money management.

Mistake # 2: You worked with a “free” advisor

If an advisor gives you free advice and service, it needs to be paid some other way, says Bobbi Rebell, a certified financial planner and personal finance expert at Tally debt management app. “That in itself is not a problem, but it can influence the advice they give you,” says Rebell. If they earn a commission on a product they sell to their customer, it’s unclear whether they recommend it because they make money from it or because they actually think it’s beneficial. to the customer. Mangla adds, “You want to make sure that the financial advisor you choose is a fiduciary, someone who has a legal and ethical duty to act in the best interests of their clients. Counselors who work “for free” often do not. To check if a financial advisor is a trustee, visit napfa.org or the SEC advisor database.

Mistake # 3: you haven’t shopped

You want to make sure that you feel comfortable with an advisor and that you fully understand and have control over their references. For this reason, it’s important to shop around, interview different candidates, and see which personality you have the best connection with. “Start by looking for recommendations from people you trust and do your due diligence by reviewing them,” Mangla explains. (Use this tool to be matched with a planner who meets your needs.)

Mistake # 4: You haven’t clarified your goals and expectations with the advisor

It’s a common mistake people make, says Arielle Jacobs-Bittoni, financial planner at Refresh Investments. Let people know what your short and long term goals are and how often and by what method you plan to contact your advisor. And Mangla says you should have a clear idea of ​​what you need help with. “It is important to first think about the goals you want to achieve with a financial advisor: do you want investment advice? Help with debt management or tax planning? », Explains Mangla.

Mistake # 5: You Didn’t Check an Advisor’s References or Background

“There are many ways to check a potential advisor’s background, such as CFP Verify and the FINRA Brokercheck. You can make sure an advisor has the credentials they advertise, look at their years of experience, which companies and when they passed their licensing exams, ”says Tiffany Lam-Balfour, investment spokesperson for NerdWallet. You can also see if they have been the subject of customer complaints in the past.

Mistake # 6: You didn’t make sure their investing and planning philosophy matched yours

“Determine if the advisor’s investment philosophy matches yours,” explains Jacobs-Bittoni. Grace S. Yung, Certified Financial Planner at Midtown Financial Group, says a good tip is to make sure you look at the three Ps – “The people, their philosophy and performance. What I mean by that is you should never hire someone just because your friend says they’ve given them good returns or good performance. Performance can come and go and is only one aspect of the relationship between you and your advisor. You also need to make sure you click with the advisor and agree with their investment and life planning philosophy, ”Yung explains.