If you are wondering how to find a financial advisor, you’re not alone as the process can be challenging. The industry has long lacked consistent standards, and anyone can call themself a financial advisor. To make matters more confusing, what financial planning services advisors provide, how they are compensated and how they provide – or don’t provide – value runs the gamut.

I’ve worked as a fee-only financial advisor for nearly 20 years. Over that time, I have worked with hundreds of clients. While there are numerous articles about how to choose an advisor, I thought my experience and knowledge of the industry would provide a slightly different informed perspective. So with that as background, if you are thinking about hiring a financial advisor, here is what I would recommend.

Step 1 – Identify What You Want to Accomplish by Working with an Advisor

The days of stock brokers offering hot tips and calling it financial advice are on the wane. Clients are increasingly seeking holistic advice about whether and how they can achieve their financial goals. If you’re considering working with a financial advisor, it helps to have a clear idea of what you’d like to accomplish, and based on my experience, that often falls into one of a few different categories as follows:

Confirming you’re on track – clients who fall into this category typically have a financial goal they want to accomplish, and they want an expert opinion as to whether they can realistically meet the goal. Often, what drives them to seek advice is that they have reached some sort of milestone – a 50th birthday, or being 10 years from retirement – and they want a clear assessment of where they stand vis-a-vis their goal.

Ensuring You’re Making Optimal Decisions – clients who come to us with optimization in mind have often done a good bit of planning on their own. They want an informed opinion to validate the steps they have been taking and confirm there isn’t anything they are missing. Reaching milestones lead clients to seek this advice, but so do transitions like changing jobs, getting married or having a child.

Need Assistance with Money in Motion– money in motion is an industry phrase that refers to assets that are in transition. A few of the more common examples of money in motion are the rollover of a 401k, receipt of an inheritance or cashing in stock options. Two questions we often hear when it comes to money in motion are what are the choices for the assets and how should they be invested. For example, if you inherit a portfolio of investments, you may have questions about options for transferring assets into your name, any tax consequences and how the assets should be invested to support your financial goals and needs. Equity grants give rise to another common set of money in motion questions – how RSUs or stock options work, how they are taxed and what to do with the grants.

You’ve Built or Inherited Wealth and Want Ongoing Guidance – the most common reason to establish a long-term ongoing relationship with a financial advisor is because you want assistance in managing your investments. There are several reasons you might want assistances with this, including

  • Lack of time to do this on your own
  • You think you would benefit in working with someone with investing expertise
  • You’re uncomfortable with the ups and downs of the market and it’s hard for you to remain invested if you manage things on your own
  • You want ongoing holistic financial advice from someone with expertise who has a clear overview of your financial situation
  • You want someone who knows the ins and outs of your financial situation and can step in should something happen to you

The above list isn’t exhaustive, so you might have another reason for working with a financial advisor. There are, however, some clear cut situations in which a financial advisor likely won’t be able to provide much value. If your situation is simple – you’ve just started your career, you are clear on what you should be doing financially and you’re doing it or if you’re retired and living exclusively on Social Security and/or a pension – a financial advisor likely wouldn’t bring much value. That’s also the case if you haven’t been able to save and think that will continue to be the case over the near term. Lastly, few advisors offer assistance with debt consolidation or debt counseling, and if that’s your concern you might look for a non-profit like the National Foundation for Credit Counseling for help.

Step 2 – Start Your Search – once you’re clear on why you want to look for a financial advisor, the next step is to start your search. Financial advisor near me is one of the most popular search terms for people looking for an advisor, and the internet is an outstanding tool when it comes to finding an advisor. Still, you might start with the old fashioned approach of asking family and friends or – if you have them – an accountant or attorney with whom you work if there is a financial planner they would recommend.

If your personal network doesn’t lead anywhere and the internet will be your primary tool, consider looking to industry organizations that have a long history of consumer advocacy. I’m a fan of the National Association of Personal Financial Advisors as well as the CFP Board, as both organizations were staunch advocates of a fiduciary standard and transparency in the industry. One additional organization – the CFA Institute – were supporters of a fiduciary standard, although its members tend to be much more focused on investments than holistic planning. Still, if that’s your primary concern, they would be a good resource in your search.

As you search the internet, you’ll find countless paid ads for financial advisors. A few of the ads will be for advisory firms themselves, but most will likely be for organizations that offer to connect you with a financial advisor if you provide them with a good bit of information about yourself. You don’t pay anything for the service as the services are paid by the advisor, sometimes on a per lead basis and sometimes via a revenue share.

While the “free” part of the transaction is attractive, just remember the old adage that if you’re not the one writing the check, you are the product being sold. If you decide to work with an advisor lead service, make sure you understand what criteria they used in choosing their advisors (more on that below). If the service won’t provide the criteria, or the criteria are lacking, forego the offer to connect you with advisors and keep searching on your own. Once you’ve pulled together a list of financial advisors, you can begin winnowing down the list as outlined in Step 3.

Step 3 – Narrowing Your List

Once you know what you want to accomplish in working with an advisor and have pulled together an initial list of prospects, you can begin paring down that list with a series of specific questions as follows:

Does the Financial Advisor offer the service you’re looking for? The starting point in assessing a firm is determining whether they offer the service you are looking for. In my experience, this is most frequently an issue if you are looking for an advisor to provide planning advice on an hourly or project basis. The challenge is that many firms only work with clients on an ongoing, or retainer basis and don’t provide advice on an hourly basis. Even those who do work on an hourly or project basis often don’t assist with implementing a plan, although that has begun changing in recent years as more advisors offer subscription services.

For those who want an advisor to manage their assets, asset minimums can be an issue. Minimum required portfolio sizes of $500,000 or $1,000,000 aren’t unusual, although some advisors have the flexibility to waive their stated minimum. Finally, some advisors don’t manage assets, so if that’s a service you’re seeking, make sure the advisors you’re considering offer it.

The two best sources to gather information on what services an advisor offers and any minimums or restrictions are the advisor’s website and the ADV. The ADV, or advisory disclosure brochure, is a document the SEC and state regulators require most advisors to file. It outlines a great deal of information about the advisors and the firm, including services offered and cost. You can download a copy of the ADV from the SEC website here, and when searching, make sure to search at the firm level. Lastly, the Part 2 brochure of the ADV will be most useful to you in reviewing the firm service offerings.

Is the advisor a fiduciary? – per Wikipedia, a fiduciary is defined as someone who holds a legal or ethical relationship of trust with one or more parties. Financial advisors who act as fiduciaries are required to always act in the client’s best interest. Unfortunately, not all financial advisors are required to act as fiduciaries, as Wall Street successfully fought against a fiduciary requirement. Fortunately, many advisors who act as a fiduciary advertise this fact on their website or in their literature and ideally, should provide a fiduciary pledge in any agreement you sign with them. While some would argue a fiduciary standard isn’t an absolute necessity, if all else is relatively equal, why wouldn’t you choose to work with the advisor who pledges to act in your best interest at all times?

Are you comfortable with the compensation model? The industry has come a long way from the days of advisors earning their income via commissions and there are now a number of compensation models. Many in the financial services industry do still earn at least some of their income from commissions, but fee-only advisors have become increasingly common. And while many fee-only advisors charge based on the size of a client’s portfolio – commonly known as assets under management or AUM – some advisors offer flat fee retainers that don’t fluctuate with the size of the portfolio. A third option is hourly planning, in which the advisor charges an hourly rate and the total fee is based on the number of hours required for the engagement. Lastly, subscription models – in which you pay monthly or quarterly – are becoming increasingly common. Given the array of choices now available, you should be able to find an advisor whose compensation model fits your needs.

Does the advisor have a niche in working with clients like you? There are many ways to define a niche, but you’ll know you’re on the right track if you find an advisor who works with clients whose situations are similar to yours. That could mean you work for the same employer – for example, we help Federal Government employees plan for retirement – or it could mean you’re going through a similar transition like helping your aging parents stay on top of their finances. The two big advantages to working with an advisor focused on your niche is that they won’t need to do a lot of work to get up to speed on many of your financial details, and they’re likely already aware of the primary issues you should consider.

Step 4 – The Introductory Meeting

Once you’ve pared your list of options to a few candidates, you should schedule introductory meetings. NAPFA and the CFP Board both provide a good list of questions to cover during your research or in the meetings. Beyond straightforward fact gathering, the introductory meeting is a great way to determine if there is a good fit for you with the advisor. What constitutes a good fit is unique for each of us, but two characteristics that are key are:

  • Good listening skills – a good advisor listens. So much of what we do is centered around understanding financial goals and concerns, and for most clients, it takes time and considerable thought to identify exactly what those are. A good advisor will work closely with you during this process and ask clarifying questions and provide informed feedback. if you walk out of the introductory meeting feeling that you know a lot about the advisor and the firm, but the advisor knows very little about you, it does not bode well for the relationship.
  • Ability to clearly explain complex concepts – as you pursue your financial goals, there will almost certainly be ups and downs, particularly in the financial markets. Sticking to your plan can be challenging at these times, but the better you understand your plan, the more likely you are to stay the course. An advisor’s ability to explain how diversification works or the plusses and minuses of an 83b election or a host of other concepts is extremely helpful as it helps build trust and understanding and keep you on track.

Choosing a financial advisor can be as key to your financial health as finding a good primary care physician is for your physical health. Following a clear process like that outlined above increases the likelihood that your search will be successful and you’ll put yourself on the path to long-term financial success.