How to Choose a Financial Advisor?

Most people would agree that choosing a financial advisor could really be a daunting task, especially if you’re not even familiar with the factors that should be taken into consideration.


If the choice is made correctly, expect to reap a number of benefits after quite some time. However, if done carelessly, your choice could be disastrous not only to you, but even to your family as well.

Picking A Financial Planner Wisely

Here are some useful tips that will help you identify, evaluate, and choose a financial planner that’s really capable of solving your financial problems and help you achieve your financial goals with ease.

Tip #1: Decide What Type of Financial Planner You Really Need

There are 4 basic types of financial planner and each one differs from the other.

Registered Representatives: These are also known as investment representatives, stockbrokers, and bank representatives. Their main job is to sell investments as well as insurance products, and they’ll get a commission for doing so.

Financial Advisors: They’re better known as IARs (Investment Advisor Representatives) and RIAs (Registered Investment Advisors). These professionals have the highest ethical standards in the financial services industries, because they’re usually compensated with fees, and they’re also considered as financial fiduciaries.

Financial Planners: These professionals don’t need to have a license in order to execute their job. Likewise, anyone is capable of being a financial planner. So, it’s advisable to opt for one who has a CPA/PFS, ChFC or CFP certification.

Life Insurance Agents: Life insurance is becoming a bigger part of sound financial planning. Some Edmonton life insurance agents will carry a life license as well as other licenses. While others may only carry a life license.

Money Managers: They have the same characteristics and registrations that a financial advisor has. However, their distinguishing feature is that they’re allowed to make decisions for the investors even without the approval.

Tip #2: Be Objective at All Times

After being familiar with the different types of financial advisors, you can now use the process of elimination. Try to figure out which one would be really helpful to you and exclude the other three. Make sure to identify the weakness of each and focus on the qualifications too. Among other things, it’s advisable to opt for a financial advisor that specializes in retirement planning. Likewise, no matter how promising it may sound, never choose an advisor just because he has an outstanding sales skills and appealing personality. Chances are, this isn’t really the kind of advisor you need.

Tip #3 Gather and Analyze the Data

As much as possible, try to collect the same information from a number of professionals you’re eying on– this would make the comparison process easier and more convenient.

Also, your data gathering should focus on these categories:

  • Ethics: Criminal record, compliance record, registration, licensing, fiduciary status;
  • Credentials: Education, experience, certifications;
  • Services: Money management, planning, investment advice, tax advice, insurance advice, legal advice;
  • Business Practices: Methods of compensation; track record, types of reports, expenses; ongoing services;

Tip #4: Check the Internet, but Don’t Solely Rely on It

If you’re not aware, which we doubt, you can find public information on the Internet, but it doesn’t mean that everything would be true.

However, the good thing about this is that you can maintain your anonymity and go beyond the advisor’s own website like to see testimonials and if the advisor has any other social proof.

  • If you already have an advisor in mind, Google his name and the firm he’s working in. Visit at least 20 of the hits you’re going to get.
  • Check the third-party contents, such as websites, newspapers, and magazine, that mention the financial planner you’re considering.
  • Keywords can help you know the advisor better. You can combine the firm and the advisor’s name together with these words: lawsuits, fraud, scams, fines, FINRA, suspensions, etc.
  • Visit the SEC and FINRA to check the advisor’s records.

Tip #5: Meet in Person

If you want to attain a successful interview, you should try your best and establish control from the very beginning.

Keep in mind that advisors have the tendency of controlling the interview because it allows them to show their good side while trying to hide their flaws. Aside from that, letting the advisor take full control of the interview would mean that you’ll only hear what they want you to hear.

So, before you meet, it’s important to prepare an agenda and stick with it all throughout. This will also help you compare the advisors, especially if you’re going to use the same questions. Written responses should also be required.

Tip #6: Don’t Forget to Check the References

Most advisors rely on references to verify their performance, quality, ethics, and business practices. Though, don’t rely on the references given by the advisor, because there’s only a minimal chance that they’ll be honest and show their bad side. Instead, ask their previous clients and ask them about their experience with this financial advisor.