Follow These Steps When Selecting a Financial Advisor

When it comes to securing your economic future, it’s important to select the right financial advisor.  No matter how educated or market savvy you are, professional financial advice can be invaluable when your finances grow to a level that creates more complexity, or when you may not have the time, energy or desire to manage your finances.  

When you do decide it’s time to seek a financial advisor, there's more to selecting the best professional for your situation than scouring the internet, reading a few dozen reviews, or taking recommendations from knowledgeable friends. There is no single 'right' sort of financial advisor. Everyone has different financial goals, needs, and circumstances. The right financial advisor for you is the one that takes these individualized factors into consideration and helps you to meet your goals.

Here are the steps you can take to select a financial advisor:

Look at Their Credentials

You’ll want to first decide what type of help you are looking for. Is it for a one-time issue (i.e. purchasing life insurance or putting together a buy sell agreement for a business) or are you looking for longer term guidance and a relationship (retirement planning and tax strategies)? When you know the type of financial guidance you need, you can then narrow down your choices to the appropriate professionals.

Interestingly, and perhaps a bit alarming, there is no standard for using the title of financial advisor. Just about anyone can hang up a sign that says they're a financial advisor, but that doesn’t guarantee any sort of real expertise. And despite the financial industry’s and our government’s talk of change, “Should the SEC regulate the ‘advisor’ title?” we are probably still far from any official regulation for the financial advisor title.

That being said, the credentials that a purported financial professional has will tell you plenty about their qualifications to meet your financial needs.

A financial advisor can have several certifications. CFP®, CFA, and CPA may be a few that look most familiar. Knowing what these letters mean will help guide you in your selection process. If you are looking for specific tax advice, a Certified Public Accountant (CPA) is a credential you will want to see. If you are looking for holistic financial advice, I recommend you make the CFP® (CERTIFIED FINANCIAL PLANNER™) designation a non-negotiable criterion for your selection. . The CFP® certification requires the highest fiduciary standard, not to mention several years of financial planning experience, extensive coursework and the passing of a comprehensive exam. For a full list of financial designations and their definitions, visit the FINRA website.

Choosing the Right Type of Financial Advisor

There are many different ways to categorize different types of financial advisors, but there are two distinctions that every investor should know about and understand fully.

           Fiduciary or Not

Some financial advisors are fiduciaries and others are not. It is generally recommended to choose a fiduciary for your overall investment management needs, because they are legally bound to place your interests above their own. [Related content: Why You Should Choose a Fiduciary as a Financial Advisor]. However, it may be ok to work with a non-fiduciary in certain situations. For example, if you just needed life insurance, you could go to an insurance agent who is licensed to sell you the financial product you need, but who is not obligated the same way other financial professionals are to meet the highest standard of care.

           Compensation Model

The second level of distinction is based on how a financial advisor is paid. In general, there are three types of financial advisory fee schedules: commission-based, fee-based, and fee-only. You can take a closer look at these three types of compensation models in this recently published article in Kiplinger: Your Financial Adviser Charges What? Understand the Value of Advice. If you seek a longer-term relationship and advice, I recommend a fee-only advisor. Fee-only advisors adhere to fiduciary standards and are paid either through hourly rates, flat rates, or as a percentage of the assets they manage.

Find a Financial Advisor that Fits

This is probably the most important step of them all. By taking the steps we've discussed, you've already gone a long way towards locating the proper fit, but there are a few additional factors to take into consideration.

  • Trust: You need an advisor that you're comfortable with. In my opinion, it’s impossible to trust someone after only meeting them once or twice, but you need to have a good gut feeling and get along with them from the start.

  • Long-Term Vision and Value: Just as importantly, the right financial advisor understands the vision you have for your financial future and is willing to help you work toward it. This does not mean that the right financial advisor is the one who signs off on your every whim. In fact, the opposite situation is often preferable.

  • Objective: The right financial advisor will always tell you the truth about your decisions, whether it's what you want to hear or not.


With the sheer amount of information available out there, it's easy to get overwhelmed and put off the important decision of choosing a financial advisor. Unfortunately, this isn't a decision you should wait too long to make. Hopefully, what you've read here will eliminate some of the worry and hesitation that comes with excessive information. But don't be in a hurry either. By following these steps and practicing your due diligence, you'll find an advisor that can help you achieve your personal goals.


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