How To Choose A Financial Advisor - handshake

While talking with new clients that have hired me as their financial advisor, many have said that they did not know there was a better approach to managing their financial life. They were either displeased or only moderately happy with their former advisor, but did not know how to make a change until someone pointed them to me. When it came down to it, they just didn’t know how to choose a financial advisor.

There are fabulous advisors out there doing wonderful work with clients, so there is absolutely no need to settle with someone who doesn’t quite feel right, or doesn’t go over and above to meet your needs. But if you don’t know some simple basics, it can be hard to feel confident about your decisions. 

Here are 10 key steps to help show you how to choose a financial advisor, and make sure they really are the right one for you.

#1: Find someone who will be your financial advocate  

Just because your friend recommends her advisor, keep in mind that they have to be a good fit for you (and if you are married or in a partner relationship, for both of you). There may be many good people out there, but they need to be what is best for you. A good advisor is someone who will partner with you and give you recommendations, but empower you to make decisions for yourself.  If you want someone to act in your best interest, ask the advisor if they will be acting as a fiduciary in your work together.

#2: A good advisor will have a skill set that matches your needs 

If you have your plans in place but just need some help investing assets, then a financial advisor should be able to help you. If you need something more comprehensive such as estate planning, asset protection, or charitable planning, you may need a wealth manager. This is someone who can work with you on a holistic approach and help you address all of your needs while using this information to help you manage your investments.

#3: Understand the different types of financial advisors

Professionals in financial services can work in several roles, and understanding the difference can be key in how to choose a financial advisor.  Someone can be a broker which means they are a registered representative and usually get paid on commissions and/or transaction charges. 

An investment advisor representative of a  registered investment advisor (an RIA) will generally be paid with an asset-based fee, and a fee-only financial planner may charge a lump sum planning charge or an hourly charge.

Finally, there are people like me who are a combination of the above. There is no right or wrong, but the important part is that you understand the fees and what services they will provide for those fees. This is both up-front and on an ongoing basis. Most advisors offer a complimentary initial meeting so take the time to truly understand your advisor and their role.

#4: Check out your potential advisors

If they are a registered representative, then go to the FINRA website and do a search.  Any regulatory action that may have previously been taken against them will be listed. If there is any regulatory action, understand the situation very well before working with that advisor. You can also ask for references and call them.

#5: Pick someone who listens to you  

If they are doing 80% of the talking in the relationship, then move on to someone else. An advisor should spend their time learning about their clients and then using that information to help them achieve their financial goals.

#6: Discern their main value proposition

This one takes some guile – sometimes their main value proposition is not what they tell you is their main value proposition. If the advisor’s main selling point is a particular product or past investment performance, walk away. 

This is someone that has their own agenda and is not willing to tailor an investment plan to your needs.  Also, although we see this on every piece of investment literature “past performance is not an indicator of future performance” it is one of the most often used factors to entice investors.

#7: Look for their designations

If you have concerns about technical skill or ethics – which in my mind, you really should –  consider picking an advisor that has an industry designation such as Certified Financial Planner® (CFP),  Chartered Financial Consultant® (ChFC),  Certified Private Wealth Advisor® (CPWA) and Accredited Investment Fiduciary® (AIF).  

The entities that govern these designations have a very strict code of conduct for their designees.  This just gives you another layer to rely on.  You can find local Certified Financial Planners at the CFP Board of Standards website.

#8: Check out their network

If you think you may need other professionals on your side too, ask the advisor who their team of experts are that can help you. For example, their skills may not extend to tax planning so you’ll need to see someone else for that. These experts do not need to be in-house, but they should be accessible. 

Does this advisor have a network that includes reliable accountants, attorneys, insurance specialists, professional coaches, etc. that they work with that they can refer you to?  Also ask about how this works – how do they collaborate with these advisors? You’ll want it to be as seamless as possible.

#9: Understand the client journey

Ask the advisor who will be managing your account on a day-to-day basis and who will be meeting with you.  Often the larger the firm, the less likely your advisor is actually working on your financial and investment plans.  Also, form a picture of how often they are going to meet with you and make sure this is in line with your expectations.  

Additionally, make sure they understand your communication preferences and how involved you want to be in the investment process and whether they can accommodate these needs.

#10: Establish their limitations

Ask if they are limited in any way in offering solutions tailored for your needs. Advisors should find it comfortable to be honest about this. Are they required to offer a specific line of investment solutions? If they are limited, understand these limitations and make sure you are comfortable before proceeding with the advisor. Also ask if there are any conflicts of interests.

Understanding How to Choose a Financial Advisor 

Now take the next step. If you know people who have employed the services of a financial advisor, or if you have particular people in your life whose opinion you value, ask them who they think can help you manage your financial life. When you’re looking on the internet, be thorough and find several options. 

If you’d like to make Sea To Peak your first port of call, we’d be glad to answer any questions you might have. We’d love to start getting to know you, and to see if we might be a good fit. Reach out and schedule an appointment with us today.

With best wishes,

About Stephanie

Stephanie Bruno is an Investment Advisor Representative of Dynamic Wealth Advisors dba Sea To Peak Financial Advisors. All advisory services offered through Dynamic Wealth Advisors. To learn more about Stephanie, read more here or connect with her on LinkedIn.