8 Things To Look For In A Financial Advisor

As I discussed in a previous article, I am not of fan of financial advisors. For a lot of reasons, I do not think they are worth the money spent on the “advice” they provide.

To be fair, if your heart is set on getting “expert” advice, I feel I should at least try to coach you on how to avoid the crooks that are out there. Choosing a financial advisor is a major life decision that should not be taken lightly. Choosing the right advisor can determine your financial trajectory for years to come.

Why Use A Financial Advisor?

There are all kinds of titles used to describe people in the world of money management. There are investment advisors, estate advisors, financial advisors, and financial planners to name a few. All these terms may sound similar but really aren’t.

Finanicla Advisors what to look for

The broadest of these terms is financial advisor. Financial advisors can focus on long-term investment planning, tax planning, and investing advice. They generally operate independently or are part of a group of financial advisors. In general, financial advisors give you advice on your finance health.

The best ones should act like a partner with you and be your educator about your finances. They should help you figure out how to get out of debt, decide when and how to invest your money, and how to manage finances to minimize your tax burden.

They look at the big picture and can help you map out a plan from where you are now to where you want to be in the future. Financial advisors should help you weigh the pros and cons of major financial life decisions and guide you on the best course of action.

The best financial advisors will also help you create and document financial goals as well as plan for every aspect of your life. They will help guide you in all financial decisions to maximize your success. Financial advisors can guide you from buying a house, saving for your children’s college education, planning for their wedding, and your eventual retirement.

A good financial advisor should offer a plethora of services and can include:

  • Getting out of debt
  • Improving your credit score
  • Figuring out the best mortgage to get
  • Investment Help and Advice
  • Insurance Coverage and Planning
  • Tax Guidance
  • Budgeting Advice
  • Savings Goals and Emergency Planning
  • College Planning
  • Retirement Planning

What to Look For in a Financial Advisor

Here goes, 8 things to look for in a financial advisor

Fiduciary Responsibility

A fiduciary responsibility means that financial advisors are obligated by law to look out for the best interest of their clients. At all times and above all else. A fiduciary financial advisor is obligated to make recommendations that benefit you and only you.

A fiduciary also prevents financial advisors from acting out in their own self-interest (i.e. recommending insurance policies or investments that prioritizes and optimizes their fees and commissions vs providing you maximum benefit).

So how do you find one?

It can be confusing. To start, try Google searches such as, “fiduciary financial advisors near me” or “best fiduciary financial advisor”. While you can do searches in your local geographic area, don’t let it limit you in your search. With the explosion in usage of Zoom and Microsoft Teams, you can work with a good financial advisor 2,000 miles away if you choose. Better to find good help far away than mediocre help close to your house.

Once you find someone, make sure to interview them to see if they are a good fit. The best way to find out if an advisor is a fiduciary is to simply ask them. Here are some sample questions to identify any potential conflicts of interest:

  • Do you have a full-time fiduciary obligation to your clients?
  • Are you a Registered Investment Advisor?
  • Are you regulated by the SEC (Security Exchange Commission) or FINRA (Financial Industry Regulatory Authority)?
  • How are you compensated?
  • In what circumstances do you serve as a fiduciary and in what circumstances do you not serve as a fiduciary?
  • Do you receive compensation or commission in any form from a 3rd party?

Academic Education

This one may seem intuitive but work with me for a minute. One would think that a financial advisor has a college degree, an MBA (preferably), and a foundational knowledge in either finance or accounting, right? Guess again.

IMO and from my personal experience, I want someone who has an academic education, either a BA or MBA, and graduated from a reputable university.

What kind of academic background do you think financial advisors have? To be honest, it’s all over the map. I’ve seen people with degrees in marketing, finance, economics, teaching, and even recreation park administration obtain jobs to be a financial advisor.

What gives? How is that possible?

It may surprise you to find out that according to Investopedia, financial advisors are not required by law to have a university degree.

What is required? Passing specific certification and licensing exams.

Professional Certifications and Credentials

FINRA requires financial advisors who wish to be licensed to pass either the Series 65, Series 66, or the Series 7 exam. The type of financial advice being provided is determined by which exam is passed.

Passing the Series 65 exam does NOT qualify a professional to sell any securities but rather to provide clients with investment advice and financial planning. An interesting point to reinforce is that professionals with a Series 65 license can only work on a non-commission basis by charging hourly fees.

A Series 66 license qualifies a candidate as an investment advisor representative and as a securities agent. The Series 66 is a co-requisite along with the Series 7 exam. This means that both must be successfully passed before a candidate can register with the state.

The Series 7 exam is the most general securities license available. Passing the Series 7 allows financial professionals to sell any type of security other than real estate, life insurance, and commodities futures.

Also, there are certain certifications and credentials that tip-off that the professional has a fiduciary obligation. Among these are:

  • Certified Financial Professional (CFP)
  • Accredited Investment Fiduciary (AIF)
  • Chartered Financial Consultant (ChFC)


You have spent years, maybe even decades, amassing your wealth. Do you trust it to someone who has just graduated college with no life experience of their own? Surprisingly, a lot of people do. If that person is under someone’s tutelage is one thing.  If they are solo, it is totally another thing situation.

Experience counts just as much, and maybe even more, than education. Once you have found someone you think might be a good fit, check them out. You can find a lot of information online. Do a background check to see how long the advisor has been in practice, if any complaints have been filed, and research for names of other clients to obtain references on the quality of their work.

Don’t ask them for references because they will only reference people that they KNOW will give a good review. It’s literally like the proverbial fox watching the hen house!

A great way to do this is to look up the firm’s Form ADV. This form is a key disclosure document that financial advisors must file with the SEC and state securities authorities. There are several parts to this form including:

  • Description of services offered
  • Types and number of clients served
  • Amount of assets managed
  • Explanation of fees, compensation structure, and billing practices
  • Outline of company history, certifications, education, and work history
  • Disciplinary actions both regulatory and judicial taken due to misconduct
  • Potential conflicts of interest and client risks
  • Individual bankruptcy filings (if applicable)


Financial advisors claim to have a wealth of specialties from debt management to college planning for your kids to retirement planning. Some specialize in high net worth individuals and business owners. Others specialize in young professionals just starting out in life.

Whatever the case, be sure to understand what your needs are currently and their specialty in order to understand the advisor’s strengths and weaknesses. Knowing if they are a good fit can mean the difference between success and failure.

It’s ok to have different advisors at different phases in your life. Figure out your needs in order to understand what help is needed.

Red Flag: If an advisor claims to be “experts” in all financial facets of life, run! Run away as fast as you can and don’t look back. No single advisor can be everything to everyone.

Fee Structure

Ah, fees. 1 of the 3 big things (2nd one being inflation and 3rd being taxes) that can have the most negative impact on your retirement planning. How much of an impact?

Todd Tresidder from Financial Mentor states that financial advisors can cost you as much as 75% of your retirement funds over your life….. 75%! I know it sounds outlandish but just check out the link here to get his free lesson. There is a lot of data here so take your time reading it.

I’ll do my best to paraphrase his lesson.

First the accumulation phase. Assume that a financial advisor is charging 2% for assets undermanagement (on the high side but very realistic). Using the Rule of 72, this means that you lose 1 doubling period for your money every 36 years. No big deal, right? Wrong.

Assume you received an 8% average annual return before fees. After fees, your portfolio is only earning a 6% average annual return.

Let’s use real numbers in an example. Assume $100,000 is invested at 8% for 35 years. Your future account value would be $1,629,254.99. However, that same $100,000 earning 6% only grew to $812,355.15. That means, assuming all other things being equal, you’ll have half as much assets after 35 years using a high-cost personal financial advisor as you would using low-cost alternatives (i.e. manage it yourself). Viola! 50% of your retirement is gone because of that little 2% fee your financial advisor charges.

Now let’s look at the spending phase. Assume using the 4% Rule for spending your assets. This means you can spend only 4% of your assets annually in retirement. If you’re using a high-cost provider with 2% annual fees, that means you can still spend the 4%, but 2% of that amount goes to your advisor in fees and 2% goes to you as spendable money.

Putting both expenses together, the high fees compound out to 50% less money accumulated, and the high fees also mean you can spend 50% less of what’s left in the account. This tells you that you only get 50% of 50%, which is 25% of the income you would have had if you had watched your investment expenses more closely. That means that small 2% fee differential cost you 75% of your spendable income in retirement.

Mind blowing isn’t it? It was for me.

This is why it is SO important to ensure your advisor charges you as little in fees as possible and that you totally understand how they charge you fees. Some advisors are fee only and charge a flat rate no matter what. Others charge a percentage of your assets under management. Others are paid commissions on the products they sell which causes a HUGE conflict of interest. Fiduciary responsibility or not.

If the advisor earns more by ignoring your wishes rather than carrying them out, dump them and find someone else ASAP.

Working Relationship and Expectations

Before signing up with an advisor, take the time to talk to them to understand how often, when and with whom you will be interacting. Some advisors have an initial upfront meeting and then check in with clients once a year. Other advisors provide ongoing support throughout the year to help implement the plan and coordinate with other people such as insurance agents, tax attorneys, accountants, etc.

Also understand and communicate to the advisor what you expect from the relationship and how much transparency you expect. Are you looking for a mentor and teacher on how to invest so that eventually you can take over yourself? Make sure they are aligned with your expectations. If they make it sound like what they are doing is WAY too complex for you to do yourself, search for someone else.

On the flip side, if you just want the advisor to do all the dirty work and just provide you periodic updates, tell them that.  If they inundate you with information and pester you constantly when you just want to be left alone, find someone else.

Financial Strategy

Each advisor has a unique strategy that they are comfortable with. Some advisors prefer more aggressive investments while others may prefer more conservative investments. If you prefer to stay all in on stocks but you advisor prefers low-cost index funds and bonds, they may not be right for you.

Some advisors prefer more traditional investments such as stocks, bond, and index funds. Others may be more willing to explore alternative investments such as real estate, crowdfunding small businesses, or insurance policies to generate cash flow. If you like to think outside the box to minimize risk and maximize returns, your financial advisor should too.

Where To Go From Here?

If you happen to find a financial advisor who is not a high-priced salesman, has a fiduciary responsibility, and charges low fees, leave me a comment here.

The term “financial advisor” is used very loosely. Alot of times, these people have minimal qualifications and structure fees to benefit themselves not their clients. It’s important to do your due diligence when selecting professional help to both grow and protect your wealth.

8 things to look for in a financial advisor

Not all financial advisors are created equal. A bad advisor can cost you not only higher fees but much of your hard-earned wealth that you spent a lifetime accumulating. Take the time to understand and research financial advisors to get what you want out of the relationship, to ask the right questions, and to ensure your hard-earned money is protected as you reach toward your financial goals.

Live the Life You Love, Want, and Deserve! 😊