Selecting a financial advisor

I know you don’t give investment advice.  Where can I go?

Selecting a financial advisor is an important decision.  You should be looking for someone who can supplement your financial skills in a positive, supportive and financially productive manner.

Here is a checklist of 14 questions to consider and ask when choosing a financial advisor:

  1. First ask your friends and associates who they use.  This is a way to create a short list of financial advisor candidates.  Note that you will want to find someone who handles clients of your size and type.
  2. What are the financial advisor’s credentials? What professional designations does the advisor carry? Professional designations tell you that they have undergone rigorous training to achieve a level of expertise in the industry.  Some states and some professions require licensing.  Find out what applies in your situation.
  3. How many years experience does the advisor have in financial services? Look for someone with at least five years in the industry. It typically takes that long to build a practice and establish some stability.
  4. Are they associated with a reputable firm?  Many independent advisors are part of a network such as Ameriprise Financial and tap into the foundation, tools, strength and reputation of that company.
  5. How does this financial advisor get paid? Ask this question directly. If the advisor doesn’t answer clearly and directly, that’s a red flag. If, on the other hand, they are open and clear about how they make money, then it’s a matter of choosing what compensation structure best fits your objectives: a flat fee for services, commission on sales of investment products, a combination of flat fee and commission, or a management fee based on a small percentage of your assets under the financial advisor’s management.
  6. Does this advisor and their company have a clean track record? If the prospective advisor has anything on his or her disciplinary record, don’t expect the advisor to tell you upfront. If the advisor is licensed, you can do a background check with the Securities and Exchange Commission at to see if any complaints have been filed against this person.
  7. How do you get along? In order for the relationship between you and your advisor to succeed, you must divulge personal information. Would you feel comfortable sharing confidential information with this person? Is this someone you think you could work with for several years as you pursue your financial goals?
  8. Do they communicate clearly?  You need to be able to understand what they are advising.  And they must understand you.
  9. Will they provide you with a sample?  Ask for a sample of a typical financial plan that they give to clients.  Is it understandable?  Is it in line with your needs and expectations?
  10. Is this financial advisor sincerely concerned about your success? Look for an advisor who makes it a priority to learn more about you and your needs.  Then they should take the time to educate you about the options before they offer any recommendations.
  11. How will you advise me if the financial markets have a significant downturn?  The advisor should have a clear understanding of your risk tolerance in the first place and should have helped you configure your investment portfolio to match your risk tolerance.  If they don’t include that early in the process (before any commitments are made) maybe you need a different advisor.
  12. The really BIG question:  Ask the advisor “How is your personal financial plan working for you?”  This is your chance to find out if they walk the talk.  See how forthcoming they are with the same sort of information that they will need from you.  Can they be their own reference?  Don’t expect them to be rich as they are working people too.  But they should be able to give you a sense for how they handle their own investments and what of their own recommended products they buy.
  13. What client references can I contact? Note that this may be an impossible request for many if not most advisors – those who hold to a strict code of client confidentiality.  If the financial advisor responds that he respects client confidentiality, you can consider that to be a point in their favor and use the information you can gather to make your choice.

    If you can get a list of at least three clients, ask the references questions such as the following:

  • Why did you choose this advisor? This helps you understand what attracted the client to the advisor and how that might match your needs.
  • How long have you been working together? The more experience the reference has had in working with the advisor, the more valid and insightful his or her comments are likely to be.
  • Has the financial advisor been responsive to your changing needs or changing financial conditions? Yes or no?  This will give you a sense as to the flexibility and responsiveness of the financial advisor.  Plans often need to change.
  • How well does the advisor work with your attorney or CPA? You want to find out how the advisor views the client’s other counselors.  You need a financial advisor who works well with others on your team.
  • Do you plan to continue to work with this financial advisor? Why or why not? This gives you a feeling for how positive the experience has been overall.
  1. Can I start slowly with you so we get a chance to get to know one another better?  I’d like to work on just part of my account.  Most advisors will be happy to work with you to give you a chance to see their work.  Some advisors want all or nothing and may have minimum account size limits.  Use them with care after addressing all of these questions.

Choosing a good financial advisor who is sensitive to your needs and capable of helping you navigate the complexities of investing is a good first step for moving your portfolio and other financial needs in the right direction.  Take the time to choose well.  And don’t hesitate to change later if you don’t like that direction.

Please remember that you are in control of your life.  None of this information should ever be considered a substitute for medical, financial or legal advice.