how to pick a financial advisor


July 27, 2023

5 Questions to Ask When Selecting an Advisor

In Wealth Strategy

The National Financial Education Council estimated that a lack of financial knowledge costs Americans an average of $1,819 annually in 2022.[1] As managing money yourself may be complex and require more time than you can commit, partnering with a financial advisor may be the solution you need to make sound decisions for the present and the future.

An advisor does more than buy and sell investments on your behalf – they can help you navigate tax obligations, manage risk, plan your legacy, and build a strategy that allows you to stay on track to reach your long-term goals. They can serve as specialists in areas where you’re less confident and act as confidants when you require guidance.

Your relationship with your advisor can often span decades and even generations. But how can you identify the right advisor for you? It helps to know which questions to ask.

Here are a few questions to consider with prospective advisors as you search for a match.

What’s Your Communication Style?

Communication lies at the heart of any relationship, and it’s no different regarding your advisor relationship. Determining how an advisor communicates with their clients – and ensuring that communication style fits what you’re looking for – is an essential step in assessing compatibility.

You may be seeking a more hands-on approach that entails frequent check-ins regarding the state of the markets, the performance of your investments, and the progress you’ve made toward your goals. Conversely, you may want to take a less active role in your finances, leaving most of the decision-making to the advisor. Whatever your preference, ask how often they plan to meet with you and how they plan to hold those meetings. Do meetings occur in person, virtually, or over the phone?

Other questions may include:

  • What is your availability outside of scheduled appointments?
  • How can I reach you with questions or in the case of an emergency?
  • How do you keep clients informed of market movements?

What’s Your Investment Philosophy?

This question can provide valuable insight into the beliefs and principles that drive the advisor’s decision-making process. It can also spur dialogue regarding risk tolerance, diversification, investment horizons, and other considerations you may have before entrusting an advisor with your finances.

Investing is not a one-size-fits-all endeavor – your individual needs and interests may differ from those of other investors. Asking an advisor about their approach to investing can help you discover if they favor specific sectors or asset classes. What is their stance on alternative investments? What role do fixed-income products play in their client portfolios?

You can also discuss whether the advisor can accommodate your specific areas of interest, such as impact or values-based investing. Understanding these nuances can help ensure you align with the advisor in critical areas.

How Are You Compensated?

Advisors are paid for their services in a few different ways. Some advisors are “fee-only,” meaning they get paid a percentage based on the total assets under management (AUM). Under this pay structure, the advisor is incentivized to act in the interests of their clients.

Other advisors earn commissions on the products they sell their clients and the trades they make on their behalf. It’s also possible for advisors to use a hybrid pay structure that involves some combination of fees and commissions. This structure is sometimes called “fee-based” and should not be confused with “fee-only.” Be sure to ask the advisor how they’re compensated because this can give you a sense of their priorities.

You will also want to determine whether the advisor is a fiduciary. Being a fiduciary means the advisor is ethically and legally obligated to act in the best interests of their clients.

What are Your Qualifications?

Some advisors have earned certifications indicating proficiency in particular financial planning or investment management areas. These certifications are often listed in their professional title or signature after the advisor’s name. Each designation involves different qualifications; some may be more rigorous than others. Don’t hesitate to ask the advisor about their certifications and the process they went through to earn them.

The following list should not be considered an approval or endorsement of any professional credential or designation, but some of the certifications you may encounter on your advisor search include:[2]

  • CFP®: Standing for Certified Financial Planner™, this certification signifies expertise in financial planning, taxes, insurance, estate planning, and retirement. To earn the CFP® certification, the advisor must meet rigorous education and training standards in various financial topics, complete the required minimum hours of professional work experience in the financial planning process, and agree to adhere to a strict code of ethics.
  • CPA: Standing for Certified Public Accountant, this certification is provided to licensed accounting professionals and may be held by specialists in tax management. It implies expertise in handling complex tax situations beyond the scope of what a standard financial planner might
  • CFA®: Standing for Chartered Financial Analyst (CFA®), a designation given to those who have demonstrated competence, integrity, and extensive knowledge in accounting, ethical and professional standards, economics, portfolio management, and securities analysis.
  • CDFA®: Standing for Certified Divorce Financial Analyst, this certification may indicate advisors whose skillset qualifies them to address the various financial considerations surrounding divorce.[3]

What Does Your Tech Stack Entail?

Advisors often lean on technology to increase work efficiency and help manage client relationships. Some tools help with personalization, while others consolidate portfolio information and provide investment intelligence. All of these can affect the client experience.

Some technologies, like client portals, exist to grant you better access to your financial information and allow you to reach your advisor when necessary. You may also receive financial statements and other important information through a portal or email service. The advisor should be able to discuss which technologies they use and how those technologies impact the services they provide their clients.

Finding the Right Advisor for You

These questions are a starting point to help guide your conversations with prospective financial advisors. Your search may look different based on what your individual needs are. If you’re more focused on retirement, you may want to home in on a financial advisor specializing in retirement planning. High Net Worth investors may seek somebody to guide them through the charitable giving process and other critical parts of their financial journey.

When identifying the right person to shepherd your wealth and ensure you can reach your goals, finding the right fit may take some time and research. Many advisors and advisory firms offer free consultations and financial assessments that help you gather the information you need to make an informed decision.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as tax, legal, or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are only suitable for some investors, and no investment goal is guaranteed to be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of the information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decision.
[1] Financial Illiteracy Costs. National Financial Educators Council, December 23, 2022.
[2] The Alphabet Soup of Financial Certifications. Investopedia, October 30, 2022.
[3] Find a Certified Divorce Financial Analyst (CDFA) Professionals. IDFA.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S. The CFA Institute owns the certification marks CFA® and Chartered Financial Analyst®. CDFA® and Certified Divorce Financial Analyst® are trademarks of The Institute for Divorce Financial Analysts™

Related Articles

February 9, 2024

10 Essential Tax Planning Strategies

As the saying goes, “in this world nothing can be said to be certain, except death and taxes.” While we may not have control over the inevitability of taxes, we do have tax planning strategies at our disposal to minimize the impact. When utilized productively, tax planning can be a strategic approach to optimize your [...]

Vince Lee
Contributions from: Vince Lee, CFP®, CPA, Wes Burroughs

January 8, 2024

New Gifting and Contribution Limit Changes For 2024

There’s one thing we can always count on at the start of each new year – new contributions and gifting limitations from the IRS. As you begin your planning for the year ahead, we’ve highlighted some of the key 2024 changes to be aware of for retirement accounts, health savings accounts, and gifting. Individual Retirement [...]

Contributions from: Jay Winston, CFP®

December 11, 2023

Preserving Traditions

As the air becomes crisp and the scent of cinnamon and evergreen fills our homes, the holiday season beckons us to gather with loved ones and revel in the warmth of traditions. In a world marked by rapid change and constant innovation, there is a profound beauty in the steadfast nature of holiday customs that [...]