How to Choose a Financial Advisor


Choosing a financial advisor can be both stressful and have lasting effects on your finances. Learning how to choose a financial advisor can provide not only stress relief, but also a way to increase your personal wealth. Before we jump into choosing a financial advisor, let’s first discuss who needs a financial advisor!

How to Choose a Financial Advisor

Google Map Search: “Financial Advisor New York”

Who Needs a Financial Advisor

Simply put, anyone can benefit from a financial advisor, but giving 1% of your income to a person to manage your finances seems a bit rough. Which is why I already wrote an article regarding who needs a financial advisor, the people who need financial advisors being:

  • Those with limited time
  • Individuals with too much money to manage themselves
  • Couples who are about to be married
  • Home buyers
  • People who don’t know tax law
  • Anyone with special circumstances

If any of the above includes you, indeed it’s a good idea to lean how to choose a financial advisor.

How To Choose A Financial Advisor – Step 1

The first step in choosing a financial advisor is determining which type of financial advisor you need. This was discussed previously in several articles, including one written by co-contributor Robb. To summarize, the following is a collection of the most common financial advisor certifications (and in turn, job descriptions):

I highly recommend reading the article written by Robb if you are looking for more specific details. Most financial advisors fall into two broad categories, avoiding costs (such as taxes) or increasing wealth (i.e. investments). If you have a large amount of wealth you would likely speak to a CPA, who can help you manage the taxes. On the other hand if you either already have an accountant or are looking to investment speaking to a CFP will be more beneficial.

How To Choose A Financial Advisor – Step 2

The second step in how to choose a financial advisor, once you know what type you need, is choosing a financial advisor. The easiest way to do this is a simple Google search for the type of financial advisor you need, then pick the one with either the highest ratings or no legal action (that you found on google).

I previously wrote an article titled, How to Choose a Financial Advisor in 10 Questions and I highly recommend reading it. More or less a financial advisor is an employee. You are hiring them to either make you money or avoid costly penalties. As an employee it is your responsibility to ensure they are not only the right fit but ethical. Asking questions such as,

  • Do you or have you had any legal action taken against you?
  • Have you ever been convicted of a felony?
  • May I see your credentials?

Remember, they are your employee, they work for you and you are their boss. There really aren’t any “wrong” questions necessarily, so long as you have been asked the question before in an interview it should be fair game. I still recommend reading my article if you haven’t because it goes into ten of the best questions to ask.

How To Choose A Financial Advisor – Step 3

The final step in this guide of how to choose a financial advisor, is confirmation and negotiation. After having a met with a financial advisor, confirm everything they said during your meeting. Believe it or not, there are many dishonest financial advisors, and if they are going to hand your finances you need to find an honest one. Using Google, checking with friends, confirming referrals, etc. should all be done, I know it may seem like a waste, but it’ll pay off.

If everything checks out, you then have the power to negotiate. Remember, you are hiring them. I recommend it they give you a figure, just toss a counter offer that is 75% of what ever they say. More often than not they will accept 75% of the quote they give you. The chances this will work are increased if you find several quotes for the same job. In other words, spend time seeing several financial advisors and compare prices.

How To Choose A Financial Advisor – Word of Warning

There are two specific things I would like to warn you against:

  1. Watch out for braggers, there are very few people who can beat the market on a day-to-day basis. Those who can, such as Warren Buffet are rare (notice we know the name), which is why I recommend avoiding anyone who claims they can beat the market. People can beat the market, but people who brag are either novice or gloat, in either case I would be weary of their service.
  2. Run a background check on the financial advisor you are likely going to use. After all the vetting is done via Google, interviews, checking referrals, it is still a good idea to run a background check. On occasion a background check can turn up a previous scam (maybe 10 years+ prior). If something of this magnitude turns up it will likely save your money. Con men have existed forever and probably always will, protect yourself against them.

Beyond those two specific words of warning, please be generally cautious of every financial advisor. You are giving them your money, be sure they are not going to take it and run.

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