How to Choose a Financial Advisor


Have you seen the commercials where a couple sits down with someone they believe is a financial advisor only to find out that he or she is in a totally different field? These humorous yet shocking ads make a point: the financial services industry can be confusing and often challenging to navigate. While it’s common to focus on how well your financial plan performs compared to the broader market, there’s more to it than portfolio performance alone. A knowledgeable, trustworthy financial advisor who exhibits honesty, integrity, and a dedication to your best interests is a significant asset.

Determine what you are seeking in a financial advisor before you embark on your selection process and start interviewing candidates. Are you more of a DIYer who wants someone to bounce ideas off of occasionally and then sell you products? You may be interested in a financial advisor who is more transaction oriented. They will obtain your information, recommend products, possibly put together a plan, and “sell” investments.

Do you prefer to develop a close, lasting relationship with an advisor? Are you interested in someone who will shepherd you through market shifts and help you make financial decisions that involve life events — divorce, death, illness and disability, retirement, and more? Then you want a financial advisor who focuses on building relationships with his or her clients. To help you determine what kind of financial advisor you are interviewing, simply ask this question: Is your style transaction-oriented, or do you counsel individual clients, understand their needs and concerns, and build customized financial plans? Regardless of how they answer the question, ask them to provide examples, and let them know what kind of advisor you’re looking for and why.

Be aware that financial advisors are either fee-based, commission-based, or a combination. There are merits to each of these approaches. Ask an advisor why they chose a particular approach and why it will help you best meet your financial goals. This type of questioning can also apply to advisors who work for a company versus those who are independent. Keep an open mind, gather information, and learn. In doing so, you can make an informed decision.

Credentials matter. Look closely at a potential advisor’s bio, including their experience, licenses, and certifications, such as CFP (certified financial planner). If you want someone to manage your money, look for a registered investment advisor (RIA). Be aware that CFPs can cross over and manage money as well as provide planning if properly licensed, for instance, through FINRA (Financial Industry Regulatory Authority). Other industry licenses and certifications exist, so when you find an advisor with an alphabet of designations behind their name, ask what they mean and why they should be important to you as a financial services consumer.

Interviewing advisors and asking questions is critical to your decision-making process, but the feeling that you can work well with a financial advisor is also vital. Trust your instincts. If you don’t “click” with a financial advisor, keep on looking and take your time. Your financial well-being is worth it.

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