How do I find the right financial advisor for me?

How do I find the right financial advisor for me? I've been personally referred, looked online with web searches, but none of this is helping me find a qualified financial advisor that is right for me. What can I do to find the right advisor?

Co-Published on Investopedia

Co-Published on Investopedia

Finding the right adviser is difficult but not impossible. You will want to research advisers and then set up appointments with at least three or four of them. Start with asking those you know if they work with a financial adviser and how they do business. There are also organizations such as Investopedia’s Advisor Insights, NAPFA, CFP Board, and XYPN which might give you referrals. And of course I would love to be included in the list of advisers your interview.

Broadly speaking, I tell my students they want an adviser who meets four criteria:

  1. Fiduciary – They are legally obligated to do what's in your best interest and not their own.

  2. Fee-only – They earn money only from you and not from commissioned sales, referral fees, or other kickbacks.

  3. Comprehensive – They do more than just investing and retirement planning; including budget & cash flow analysis, tax planning, estate planning, risk management, insurance planning, and strategies for funding major life goals such as paying for a child's education or buying a home.

  4. Life planning – They talk more about your goals than about their process. Your adviser is there to help you achieve the life you want, and the way they conduct their meetings should reflect that.

This page on my website goes into more details on why these elements are what you want to look for in a financial adviser, but the short of it is these four things are what separate financial planning as a profession and financial planning as a product sales industry.

Once you have a few interview meetings set up, the following questions will help you get a better understanding of the adviser. Look for an adviser who gives straightforward answers, provides back-up to what they say, and focuses on educating you about what they mean and not on impressing you with how much they know. You can verify many of their answers through by looking at their profile and seeing if they have any disciplinary records.

Questions to Ask An Adviser in order of importance:

  1. Are you a fiduciary? Are you a Registered Investment Adviser?

    • Currently only Registered Investment Advisers are legally fiduciaries.

  2. How are you compensated?

    • Approximately 90% of financial advisers are compensated in whole or in part as commissioned product sales people.

  3. What is your experience, education, and what certification do you hold?

    • Your adviser should have significant experience in advising people on their finances, ideally with at least 10 years experience in a financial planning related field. They should also have significant education such as an MBA, the CFP certification, or a financial planning degree.

  4. What are your licenses?

    • The Series 65 license is the only pure fee-only license in the industry. All other licences are commissioned sales licenses for specific financial products.

  5. What are your fees and other costs including account closing/termination fees?

    • Adviser should be very straight forward with their fees and should never try to convince you their advice is ‘free.’ Look out especially for large account closing fees if you close your account within a few years.

  6. What services are included in your fee?

    • The adviser should provide you with their services which should go far beyond just picking investments, managing your retirement account, and selling you insurance products.

  7. What is your investment strategy?

    • Look for an adviser with a boring investment strategy based on academically-proven research. Exciting strategies about picking the best investments, avoiding market crashes, and beating the market all sound cool but all have been proven by academic research to cost investors money.

  8. What type of clients do you work with?

    • While an adviser doesn’t have to exclusively work with clients exactly like you, they should have some experience clients who have faced similar opportunities and challenges to the ones you face in your life.

Joshua Escalante Troesh is the President of Purposeful Strategic Partners and a tenured professor of Business at El Camino College. To explore working with him on your personal financial planning and investment advising needs, simply schedule a free Discover Meeting.

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