I'm reminded of a scene in Elf, where Will Ferrell visits a hole in the wall ethnic restaurant and roars, "You did it, congratulations! World's best cup of coffee! Great job everybody."
Because of his worldly innocence, he wholeheartedly believed the restaurant’s sign, proclaiming it, "serves the world's best cup of coffee."
We know not everyone can be the best. So how do you sort out the top tier advisors from the herd?
Know what to look for before you meet with them.
The following tips can help you avoid hiring an advisor who is difficult to work with. Or, one that cares more about the type of car in their driveway than you.
Let’s break down exactly how to choose a financial advisor who is well worth their fee.
How to Choose a Financial Advisor: Start with the Right Credentials
If you wouldn’t trust a doctor without an MD, why trust a financial advisor without proper credentials? Look for titles like Certified Financial Planner (CFP®) or Chartered Financial Consultant (ChFC®).
These designations require rigorous education, exams, and ethical standards. A random “wealth coach” on TikTok? Not so much.
Understand How They Get Paid
Not all advisors make money the same way, and that can affect the advice you receive. Here are the common structures:
Fee-only: Advisors charge a transparent fee (hourly, flat, or percentage of assets) and do not earn commissions. They work in your best interest.
Commission-based: Advisors earn money by selling products like insurance, mutual funds or stocks. This can lead to conflicts of interest.
Fee-based: A hybrid model where the advisor charges fees but may also receive commissions. These advisors can work with you in a fiduciary or a commission-based capacity.
The best advisors are confident in their value and discuss costs freely. If you find an advisor wavering on what they charge, it may be a sign they lack courage in their ability to help you.
Find a Fiduciary (Because Legally Required Loyalty is Nice)
A fiduciary is legally bound to act in your best interest. To most, the idea of putting client interests above their own is simply good business.
Unfortunately, not all financial professionals are fiduciaries. Some operate under the more flexible “suitability standard,” which means they can recommend investments that are suitable, not necessarily the best for you.
Ask advisors directly: “Are you a fiduciary?” If they hesitate, dodge the question, or change the subject, that is a red flag.
FYI – To maintain their designation, all CFP® professionals are held to a fiduciary standard.
Check Their Experience and Specialties
Financial advisors come in all flavors. Some specialize in retirement planning, others in tax strategies, and some cater to specific professions or life situations.
For example, if you are an individual interested in tax efficient financial planning, you want someone who understands your world.
Ask questions like:
How long have you been advising clients?
What types of clients do you typically work with?
What is your approach to financial planning?
A seasoned advisor with experience in your unique situation can save you from a lot of headaches.
For example, I have a niche in helping clients perform Roth conversions. If you are interested in a Roth conversion, be sure to hire someone who has experience and expertise in that field.
Do Some Background Sleuthing
You wouldn’t hire a babysitter without checking references. The same goes for financial advisors.
Fortunately, there are online tools that can help you vet them:
BrokerCheck (by FINRA): See if they have any disciplinary history or disclosures.
SEC’s Investment Adviser Public Disclosure: Find out if they are registered and check for any infractions.
Google & Client Reviews: A quick search can reveal a lot about an advisor’s reputation. Reviews can also give you a sense of how clients view the relationship and the advisor's personality.
If an advisor has multiple complaints, proceed with caution, or not at all. There are plenty of advisors out there with clean records.
Gauge Their Communication Style
Money is personal. You want an advisor who listens, explains things clearly, and makes you feel comfortable asking questions.
If they throw around jargon like “alpha” and “Sharpe ratio” without explaining what it means (or how it applies to you), they may not be the right fit.
Consider:
How often will we meet or check in?
Do you provide ongoing education and updates?
What is your preferred method of communication?
Some people want a hands-on advisor who checks in regularly, while others prefer a once-a-year review. Make sure their style is suitable for your needs.
BONUS TIP: A common complaint about advisors is they talk too much and listen too little. After your interview, ask yourself, "Did I feel heard and understood? Or am I more confused than ever?”
Solo Advisors vs. Advisor Teams
Another key consideration is whether you want to work with a solo advisor or a team-based practice. Each has its advantages and potential drawbacks.
Solo Advisor Pros:
Personalized, one-on-one service.
An intimate, direct relationship with the person making recommendations.
Often more flexible and independent in decision-making.
Solo Advisor Cons:
Limited capacity to serve many clients well (ask how many households the advisor currently serves. Anything over 100 can be a yellow-flag).
Fewer monetary resources compared to larger firms.
Succession planning can be a concern if the advisor retires.
Team-Based Advisor Pros:
Access to a group of professionals with different specialties.
In-house investment research team and trading.
Continual service availability even if one advisor is out.
Team-Based Advisor Cons:
You may not always work with the same person.
Larger firms can sometimes feel impersonal.
Potential for conflicting advice from different professionals (too many cooks in the kitchen syndrome).
The best choice for you depends on your preferences. If you value a deep personal connection with your advisor, a solo practitioner may be ideal. If you prefer access to a broader range of expertise and continuous support, a team-based approach might be a better fit.
Trust Your Gut
Picking a financial advisor is like dating. If something feels off, even if you can’t pinpoint why, listen to that instinct. A great advisor is someone you value, who respects your financial goals, and who has your best interests at heart.
Ideally, you'll work with your advisor for the balance of your life. Be sure to hire someone you enjoy!
Final Thoughts
Finding the right financial advisor takes a little effort, but it is worth it. The right person can help you build wealth, gain confidence, and create a strategic plan. Thus, allowing you the freedom to enjoy life today, knowing tomorrow is taken care of.
The wrong person? Hopefully, now you won’t go there… 😝
Have you worked with a financial advisor before? What did I miss? Drop a comment and let me know!
Disclosures:
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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