When it comes to finding a financial advisor, you really need to do your due diligence.  You might assume that it is a given that financial advisors would only make decisions with your money that are in your best interest.  Unless they are fiduciaries, they are not under any legal requirement to do so.

Here are five of the best tips for finding a financial advisor


Look for a fiduciary advisor

The first thing to look for when choosing a financial advisor is finding one that is a fiduciary advisor.  As we mentioned above, this type of advisor makes investment decisions based on a prudent process that helps them choose in their client’s best interest. Moreover, they will discuss with the client their investment plans to ensure they are aligned with what the client is looking to achieve.  On the flip side, an advisor acting under a suitability standard may not act in this manner.  Once the trade is placed, it is not required that these advisors monitor their clients’ accounts on an ongoing basis.

In addition, you also want an advisor that is actively investing in their education around tax planning for retirement savings.  This is a complex subject where laws are always changing, so it is key that your advisor is keeping up with this.

Look at their credentials

When looking for a financial advisor, you should always check their professional credentials.  Specifically, look for standards like CFA (chartered financial analyst) or CFP (certified financial planner). These designations actually require that the person act as a fiduciary.  If you want to check on a financial advisor’s credentials, both of these designations have websites where you can search by name (the CFP Board’s site) or the CFA Institute’s site ).  Although these credentials do not guarantee that the advisor is working in your best interest, they do tell you that the person is dedicated to their education.

Who pays the advisor

When you hire a financial advisor or planner, you don’t entirely know what you are going to get.  Some advisors are more salespeople.  Especially if they are employed by a fund management firm or an insurance company.  They are trained to sell you the company’s products and services.  Even those that are independent advisers can be selling for a company.  There are some questions you can ask to give you better insight into where your advisor is getting paid from. 

  • Do they earn commission on stock transactions or insurance sales?
  • Do they work for a financial company that offers proprietary products?

If you are not paying for your advisors services from you own pocket, you need to know where they are making their income from.

Seek out fee-only advisors

In order to avoid any advisors that may not be working in your best interest, you want to find an advisor who is paid directly by you.  You may not love the idea of paying but in the end, you will most likely come out ahead.  Many financial products like annuities have lofty sales commissions built into the price.  This is an extra fee you would not see when purchasing these products.  It is usually worked into the price so the cost is probably more than what you are paying for your fee-only advisor.

When it comes to what you should pay, a fee based on a percent of the assets managed is a safe arrangement.  So when a client’s assets increase, so would the advisor’s fees.  There is also the option of going with a per-hour fee for service. If you are someone with a higher-net-worth, this arrangement may work well.

With an arrangement such as going with a fee only adviser, you probably will not have to meet with them after the initial consultation.  Unless of course your life situation or financial goals change.

You need to trust your advisor

When choosing a financial advisor, it is essential that you trust them.  We have all seen the likes of Bernie Madoff in the news and since you are taking all the risk, this is one thing you want to make sure you have with your advisor.  This is where you want to make sure you know their qualifications, licenses and that you have access to reviews.   If you get a weird feeling that something is off, walk away.  There are plenty of great financial advisors out there to choose from.