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Choosing a financial advisor is an essential step in taking control of your finances. You’ll want to complete your due diligence before you even start talking to an advisor you’ve selected as a possibility. 

Find a financial advisor


If you have friends or family who are happy with theirs, you can ask for an introduction. But don’t stop there. Look at their website and social media sites. Most financial advisors should have a profile on LinkedIn.

In most cases, advisors who manage money and make stock, bond, and mutual fund recommendations must register with the regulatory agency FINRA (which used to be the NASD). You can look them up by name on BrokerCheck and see if they have any violations or complaints. 

If there’s more than one, you should probably move on to another advisor in your search. Most financial professionals have none, but a disgruntled client can make a complaint. However, more than one charge (or violation) is a worrisome trend.

Once you have a name or two that appear to be a good fit, you can start meeting with them and asking them questions. Feel free to write the questions down and bring them with you, because you want to make sure that you’re comfortable with the person you’re entrusting with your money.

For most investors, having more than one advisor doesn’t make financial sense. People sometimes aren’t sure whether they can trust one advisor, so they split the difference with two. Using two advisors causes issues with your portfolio since neither advisor has a full view of your money. With an incomplete picture, they may not be able to make the right recommendations.

Find an advisor you trust, by checking their bona fides and getting satisfactory answers from them. You may not invest all your money with them at once, but give them a portion to manage for at least a few months, to determine your comfort level with giving them more.



The financial advisor fit for you

Before you meet, ask if they offer a free consultation or “get-to-know-you” meeting. Good advisors usually don’t take all the clients who come to them. They want to have long-term relationships with the people who entrust them with money. 


You want to have a good relationship with your advisor. You need to be comfortable calling them if you have questions. If you feel that they don’t take you seriously or talk down to you, you won’t be able to build that level of trust you need to consult with them when necessary.


Your financial advisor should assist you with different financial decisions: buying a home, choosing a retirement community, saving for college, etc. Make sure you have someone with who you feel comfortable discussing your finances.


The relationship may not be a good fit, and it’s best to find that out ahead of time. If the advisor doesn’t offer free initial consultations, scratch them off your list and move on to the next.


Many people prefer to meet in person, but with the current COVID-19 restrictions, that may not be possible. See if you can set up a video conference so that you can see them and with potentially other members of the team. Just bear in mind that web conferences are a new technology for many financial advisors, so there might be some technical glitches at first.

Look for a fee only fiduciary

You want an advisor who tells you they act as fiduciary. This ethical promise is common in firms that are Registered Investment Advisors (RIA) and financial advisors who are also CFP® professionals. They are fee-only and must abide by strict fiduciary guidelines. 


A fiduciary is someone who has the legal duty to put your interests above their own. That means they have to recommend an investment right for you, and cannot receive product incentive pay or product commissions.


Advisors who are not fiduciaries have less restrictive suitability standards. That means they only need to recommend suitable products. They can suggest a product that pays them better over an equivalent that might be cheaper for you, as long as it’s suitable for your portfolio.

Financial advisor investment approach

  • What is their investment philosophy?

Depending on your risk tolerance and what stage of life you’re in, the financial advisor’s philosophy may or may not match with your own. When you’re young and looking for growth from your investments, you don’t want an advisor who says they’re conservative and focuses on protecting investments. You want a financial advisor to build a custom portfolio for your life priorities, time horizon, and risk profile.



  • Do they perform a risk assessment with their clients?

The asset allocation, or how much money is in different kinds of stocks compared to bonds, is an important indicator of how much and how volatile your portfolio performance will be. The best financial advisors will match your portfolio to your risk tolerance, within reason, so they need to know what your risk tolerance is.


If they don’t use a risk assessment with you, they’re most likely to use a cookie-cutter allocation for everyone. You may not get the performance you need to achieve your goals or take on too much risk for your time horizon. 

How does the financial advisor get paid?

There are many different ways advisors get paid, some of which come with conflicts of interest. The advisor should disclose all fees and methods of payment to you.

Fee-only is an excellent way to align the advisor’s incentives with the client’s. The more your account grows, the more your advisor’s compensation grows too. Many advisors use the Assets Under Management (AUM) model and get paid a percentage of the assets under management, which should be well under 2%.  

Or you may be charged on a retainer basis. 

The other model is commission-based, and you should steer away from financial advisors who are either 100% commission or fee-based with some investments on commission. Here you’re charged a fee for each transaction. There’s little to no incentive for the advisor to grow your account, and they do have incentives to keep you buying and selling, which is known as churning.

  • How often will you contact me?
    • Meeting schedules vary widely, and it’s up to you to decide if that frequency works for you. Typically, for accounts that are less than six figures, you should expect less contact and fewer meetings.


    • Who will have custody of my assets?
      • You want the advisor to have a third-party custodian. TD Ameritrade and Schwab are popular ones, but there are others. Having a third-party custodian provides you the ability to look at your accounts and see your account statements. Advisors who offer custody can make their account statements, structuring them in a complicated or misleading format.


        Without a third-party custodian, major crooks like Bernie Madoff got away with millions. He created fraudulent statements that showed the client making what he’d promised them.

      What are the financial advisors qualifications?

      There are websites where you can check what specific designations mean. If you’re starting out investing, you might be OK with someone else who has a bit less experience and is currently working on their qualifications, because they will likely charge you less.

      A financial advisor should have a minimum of five years’ experience, preferably through years of market volatility. Credentialed financial advisors, such as CFP Professionals must complete rigorous study and experience requirements. To keep their credentials active, they attend conferences and classes to stay informed and knowledgeable. CFA, CPWA and other credentials deepen an advisor’s knowledge and expertise to apply to complex planning and investing.

      Ideally, you want to see on the advisor’s website and hear from the advisor that they are familiar with your specific issue and that they’ve helped clients like you. 

      If you own your own business, you’re better off with an advisor who specializes in such clients because they know the typical problems and can help you solve them. 


      Interested in meeting with us for your initial consultation? Give us a call at 619.255.9554 or email us for an appointment.


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