How to Pick a Financial Advisor

Pretty sure most writers on this topic would have started here. But hey… better late than never?


I thought it would be helpful and important to put together a list of things to look out for, questions to ask, and information you should know before actually signing the agreement:

  1. The main question you should ask is if the advisor is obligated to live up to a “Fiduciary Standard” this means that they would be legally obligated to do what’s in your best interest… and be able to prove that that’s what they’re doing. The other type of standard that is common is the “Suitability Standard” which basically means as long as they can convince someone that whatever investments they recommended or put you in were suitable for you.. they’re fine. Basically, it’s horse sh*t… and very low and easy standard to meet.
  2. Ask about the qualifications of the advisor. In many large banking institutions, the only thing an advisor needs in order to work with clients is the passing of the Series 7 exam. While it’s a great exam for learning about options, it is not a great qualifier for being able to provide sound financial advice. I’ve seen several advisors unable to answer basic tax and estate planning questions because they simply aren’t qualified to do so and don’t have adequate knowledge. They can plug numbers into a financial software and generate an analysis that shows you’re 80% or 90% likely to achieve X amount of growth, but they can’t explain to you what those numbers actually mean to your life. Make sure they themselves or someone on their team has a CFP® (CERTIFIED FINANCIAL PLANNER PROFESSIONAL) designation on their team. Or a CPWA or a ChFC or a JD or something that goes beyond just what they need to be able to sell you things.
  3. Have them do a full financial planning analysis of EVERYTHING you have in your life before you agree to sign on with them. Make sure they’re able to discuss with you implications of your current investments/lack of investments going forward – ask about changes in the next 5,10,20, 30+ years. If you are unwilling to share information with someone and they want to bring you on anyway – that’s a huge red flag.
  4. A good advisor will not give out advice without knowing about everything going on in your financial life. They should ask about your banking accounts, investment accounts, retirement accounts, your family life, your goals, how much you spend, how much you’d like to spend, charitable inclinations, your estate plan – wills, trusts, power of attorney, your benefits from your job, social security – anything and everything that touches your financial life. If they don’t ask for these things.. walk away.
  5. If an advisor proposes a portfolio to you, ask detailed questions about what’s in it. Make sure you understand the TOTAL fees that will be charged to you. Oftentimes, aside from the management fees the advisor will charge you, there are also transactions fees, fund fees, marketing fees, and etc. Make sure you know what you’re paying because it will be charged from your portfolio. Ask questions related to changes that will be made once you hit certain life markers. What will change once you have kids? What will change when your kids go off to college? What will change once you retire? If the answers are really vague or that nothing will change… that’s a sign to walk away as well. A portfolio should change with changes that happen in your life.
  6. (This may be the most important of them all) Make sure the person feels good to you. I fully believe that the best people to work with are people you like. People you’d go out to dinner with. People you’d trust with your kids. Because ultimately, by handing over your assets to be managed by someone – that’s what you’re doing.. you’re trusting them with everything you have and your kids’ futures.. so if you don’t feel comfortable being in their office or they intimidate you in any way, don’t work with them.

I know that trusting someone with your assets is really difficult- especially in the post- 2008/2009 world. But just asking a few questions and really understanding what you’re signing up for can save a lot of heartache down the line. A good advisor will be ready, excited, and willing to educate you as much as they possibly can in order to give you comfort.

An advisor that just says “Trust me, I know this, and everything will be okay” is the biggest red flag out there.