How to Find a Financial Advisor

Finding the right financial advisor is no small task. Back in the day there might have only been a few choices, but everywhere you look now there are people ready to hand out financial advice from all corners. Thankfully there are plenty of resources to help you start the process – from web searches, to social media, word-of-mouth references, and everything in-between.

Keep in mind, getting the name of an advisor or company is one thing. What do you do next? How do you find the best financial advisor for you? Like many things in life, the answer depends.

There are a variety of factors to consider – the type of company the advisor works for, the advisor’s credentials, services offered, costs & fees, investment philosophy….just to name a few.

Here are 4 things to consider (and questions to ask) as you find the right financial advisor for you.

1. Types of Financial Advisor Companies

The type of firm the advisor works at can play a significant part in your overall client experience. Generally these are the choices:

  • Big-name Wall Street firms
  • Banks
  • Regional firms
  • Independent Registered Investment Advisors (‘RIA’s)
  • Online-only (called “robo-advisors”)

The basic service offering should be pretty consistent across the board. In other words, they all offer some form of investment management and/or financial advice.

However this does not mean they are all the same. The type of firm you’re dealing with may give you an idea of the breadth of their product & service offering, how much they cost & how they charge fees, and the level of personal attention you’d get as a client.

Taylor Jessee, our Director of Financial Planning, sat down with Rick Orford of The Financially Independent Millennial to discuss how to find an investment advisor.

2. Financial Advisor Credentials & Designations

The term “financial advisor” itself is broad. There are dozens of different titles, credentials, and professional designations. Here’s a few:

Different financial advisor titles

  • financial advisor
  • financial planner
  • wealth advisor
  • wealth manager
  • financial consultant
  • investment manager
  • registered representative
  • broker
  • agent

To be honest, the name or title doesn’t really matter. Why? Because there currently are no laws regulating what an advisor can call him or herself. If the name sounds fancy just remember a title does not automatically equal competence!

Make sure to go one step further if you’re trying to find the right financial advisor for you. You can tell a little bit about an advisor by the firm or company that they work for. But, you can (and should) learn even more by doing a basic background check through FINRA’s brokercheck or the SEC’s database (these are the regulatory bodies that oversee advisors).

Different financial advisor certifications & designations

It is also helpful to check whether the advisor has professional credentials or designations. This can give you an idea of what services/areas they might specialize in.

However, be warned financial credentialing is a pile of alphabet soup. They don’t all mean the same thing, some are more rigorous to achieve than others, and some relate to expertise in a more narrow field of practice. Here are some common ones you’ll come across:

  • CFP® – Certified Financial Planner
  • CPA – Certified Public Accountant
  • CFA – Chartered Financial Analyst
  • ChFC – Chartered Financial Consultant
  • PFS – Personal Financial Specialist
  • CIMA – Certified Investment Management Analyst
  • CPWA – Certified Private Wealth Advisor
  • CLU – Chartered Life Underwriter
  • CMFC – Chartered Mutual Fund Counselor
  • CDFA – Certified Divorce Financial Analyst

Tired yet? Sorry, but this list barely scratches the surface (there are over 200 financial designations)!

So what's a person to do?

Ask yourself what specifically it is you need from an advisor.

Comprehensive, in-depth financial planning. Look for a CFP®. Certified Financial Planner™ professionals are able to help with a wide variety of areas such as retirement planning, investments, taxes, estate planning, and insurance. Think of it almost as a one-stop-shop. The CFP® is typically held in the highest regard because it has the most rigorous certification standards in the financial planning industry. A Personal Financial Specialist or ChFC might be another choice (same with CPWA, but usually for ultra-high net worth clients). Only CPAs can obtain a Personal Financial Specialist certification. Some advisors with a duel CPA/PFS or CPA/CFP® integrate tax planning or tax preparation into their services.

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Money & investment management (without full financial planning). the CFA designation is widely considered tops in the investing world. The CIMA is another investing credential, as is the Chartered Mutual Fund Counselor (but limited to mutual funds).

Life Insurance. A Chartered Life Underwriter is someone who specializes in life insurance needs. Usually a CLU will also have a regulatory license that allows them to actually sell insurance as well.

Bottom line, the advisor’s credentials and designations may point to their focus or specialty.

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3. Financial Advisor Costs and Fees

The question we get asked most often is “how much does a financial advisor cost?“. Consumers today demand to know the cost of something before they make a decision. Financial advice is no different. Unfortunately, the finance world has not always been transparent when it comes to cost. The goal of this blog is to help peel back the curtain to give you a crystal clear picture of how financial advisors gets paid.

Financial advisor commissions

Some advisors are paid every time you buy and sell something, like a stock, bond, mutual fund, annuity, or life insurance. This is called a commission. Mutual fund commissions can also be called “loads” or “sales charges”; how you pay this sales charge depends on the share class (indicated by a letter like A, C, I, or R). Check out Morningstar or Google the fund’s ticker symbol to find all the costs.

Commissions usually work one of two ones. First, they can come straight off the top of your investment. This means the total amount you invest upfront is smaller (ex. if you buy $100 in stock but pay a $10 commission, then you only invested $90). The other way is the mutual fund company or insurance company directly compensates the advisor. This means no money is shaved off the top of your investment (in other words, you never see the sales commission show up on a statement). Make no mistake – just because you don’t see a commission being deducted from your account does not mean you are getting it for free. There is no such thing as a free lunch when it comes to investing!

Commission-based advisors are most often found at Wall Street firms, banks, and insurance companies. You can check the firm/advisor’s disclosures1 and regulatory brochures to confirm how they are paid.

Financial advisor fees

This is a catch-all category. Types of fees can be:

  1. a percentage fee on the assets they manage for you (called an asset under management or AUM fee);
  2. a flat retainer fee; or
  3. hourly fees for services (like a lawyer)

The AUM percentage fee is the most common. Usually it averages around 1% per year, but will vary from advisor to advisor and also depending on the size of your portfolio (sometimes the fee goes down the more money you invest with them). Flat retainer fees and hourly fees will vary more widely. In any event, fees should be listed clearly on the firm’s required regulatory disclosures which can be found on the advisor’s website.

Typically you see the fee-model with RIAs and robo-advisors. Since robo-advisors are almost entirely web-based their costs tend to be lower. RIAs are typically more hands-on and take an active role in your financial picture so that’s why the costs tend to be higher.

Cost is not always black and white. Some advisors have the ability to charge commissions and fees, meaning they can charge an AUM fee and sell you an annuity or insurance for a commission. This is called being fee-based.

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4. Investment Philosophy

There many schools of thought when it comes to managing money. Ask your advisor what their overall strategy is – are they short-term traders or long-term thinkers? What types of products do they use – mutual funds, individual stocks, Exchange Traded Funds (ETFs’), or some combination? Do they favor active or passive strategies? What are the internal costs for the funds and ETFs they use (called the expense ratio)?

You want to be comfortable with their investment approach and make sure it meshes with your needs. This isn’t to say you should question their every move; rather, you shouldn’t just blindly hand over your money without having an idea of what they’ll do with it. Finance is full of jargon so make sure they explain things in a way that makes sense to you. 

the takeaways

So how do you find a financial advisor? The answer generally depends. There are a variety of things to keep in mind. Start by asking a trusted family member or friend for recommendations, and also do some research online by yourself. Advisor websites are a great place to start but also be sure to go one step further and read their legal disclosures and brochures. Don’t be swayed by immediate gratification or decision fatigue. Don’t be afraid to ask questions. The more comfortable you are with your decision from the get-go, the more you and your advisor will be on the same page.

We hope you found this article helpful. Good luck!

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