Choosing a Financial Advisor

Choosing a Financial Advisor

Eileen St. Pierre, The Everyday Financial Planner

If the Bernie Madoff case has taught us anything, it’s that you should not trust too much in someone or something you do not fully understand. Many of us feel we need professional advice regarding our financial affairs, but how do you go about choosing a financial advisor? Here are some tips to guide you in your selection process.

Step 1 – Define your needs

Determine what kind of help you need before turning everything over to someone else. Do you need a comprehensive financial plan or do you have just a few questions? This will determine the type of financial advisor you select. Take a moment to answer the following questions:

  • What are your financial goals?
  • What are your expectations of the financial advisor?
  • What is your level of expertise?
  • How large is your investment portfolio?  It is common for advisors to set a minimum level of investable assets.  However, advisors in the Garrett Planning Network will accept clients regardless of their level of income and assets. 

Step 2 – Pick the right professional

Most financial professionals specialize in specific areas as evidenced by the types of credentials they have earned. Here’s a list of the most common credentials and what type of services the holder will provide:

  • CFP® (Certified Financial Planner) – comprehensive financial planning
  • AFC (Accredited Financial Counselor) – basic debt and money management
  • CDFA (Certified Divorce Analyst) – financial issues of divorce
  • CFA (Chartered Financial Analyst) – investment analysis & portfolio management
  • CPA ( Certified Public Accountant) – income and estate tax planning and preparation
  • CTFA (Certified Trust and Financial Advisor) – estate planning
  • JD (Attorney) – estate planning

Many people use a team approach by first choosing a CFP® to formulate a comprehensive financial plan. The CFP® then works with other more specialized professionals like a CPA and estate attorney to complete the financial plan.

Step 3 – Ask how the financial advisor is paid

A financial advisor may be paid in 1 of 3 ways:

  1. Commission-Based: Ask which products earn the advisor the most commission.
  2. Fee-Based: You may pay an hourly fee, a flat amount per plan, and/or a management fee for assets managed.
  3. Combination of the two: Advisor may use the terms “fee plus commission” or “fee offset” in marketing materials.

Make sure your advisor fully explains the process so that you understand it and get it in writing. Reputable financial advisors will always offer a free “get to know you” meeting so you do not need to commit right away. Go home and calculate how much these services will cost you and decide if it is worth it.

Step 4 – Look for warning signs

Reasons to choose a different advisor:

  • Refuses to provide references for you to contact
  • Recommends strategies or products you have a bad feeling about
  • Promises high rates of return on investments and downplays the risk
  • Uses high-pressure sales tactics
  • Always gets a lot of “hot tips”
  • Long-distance relationship; hard to contact
  • Borrows money from clients
  • Complaints registered with the SEC and disciplinary actions taken by credentialing organization

Remember that your money is at stake so take the time to choose a qualified financial advisor. No one will care more about your money than you.

For more information on creating a financial plan and to search for a CFP® in your area, go to and check out this video.

Visit my Basic Financial Management page for more information.