Hiring a financial advisor is a smart idea. The right advisor has the experience, wisdom, and discipline to help you reach your goals and create the life you want and deserve. However, selecting an advisor to work with is not a decision that should be taken lightly.
No matter where you live or what stage you’re at in life, you have many choices when it comes to who you hire. Prospective advisors vary widely in their scale of services, products, licensing, specialized training, and overall professionalism.
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All of this can make it difficult to find a great right advisor. However, with the right knowledge—and we’ll walk you through the basics of what you need to know here—you can find an advisor with policies, procedures, and planned services in place to support you.
And, most importantly, you can find someone who goes beyond advising to advocacy, and in doing so, shows you that you and your success are of the utmost importance to them.
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#1: Consider the five minimum standards
The first step to finding a great financial advisor—a financial advocate —is to get a sense of who is worth your consideration in the first place. With over 275,000 personal financial advisors in the United States, being able to narrow your search down in a meaningful way is crucial.
Begin your process of searching for prospective advisors (or advisor teams) in terms of five minimum standards. First, their education. They should be an expert, and the best way they can demonstrate that is with a CERTIFIED FINANCIAL PLANNER™ designation.
Second, they should be able to pass a background check. Specifically, they should be listed on the US Securities and Exchange Commission website and the Financial Industry Regulatory Authority® website.
Third, they should offer minimal basic planning. Fourth, their practice profile should fit your needs. In other words, if they are a solo advisor, ask yourself if they can offer you competitive services compared to a team. If they are an advisor team, think about whether they are a collaborative, strategically built, multigenerational team of specialists. If they aren’t, this could be a red flag.
Finally, look at how they get paid. While there’s no one right way for them to do it, it’s important that how they are paid is entirely transparent and aligned with your goals. And remember, it’s important to consider all of these standards.
#2: Make sure you’re comfortable with them
Once you’ve sorted your prospects based on the five minimum standards, it’s time to take the next step: interviewing. As you go into the interview process, bear in mind that it’s a two-way process. In other words, not only is the client interviewing the advisor, but the advisor should also be considering whether they’re the right fit for the client.
Far too often, advisors ask clients to bring a lot of things to the first meeting, including financial statements or paperwork for them to review. This could be another red flag.
Think about it. You haven’t even hired them yet, and you don’t yet know if you’ll feel comfortable with them or if you’re going to move forward. The interview should focus on answering these questions, so you shouldn’t need to bring anything other than a list of questions to ask them.
The financial services industry can be very sales-driven, and some approach the initial interview as an opportunity to sell somebody something. However, this early in the process, an advisor has no way of knowing what you need and no way of knowing which of their products and services will actually help you. The best advisors recognize this and view the initial meeting as an opportunity to actively listen to you and figure out what you need and want.
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#3: Find out if they have a “client-centric” team
While you should absolutely discuss the advisor’s various processes and services during the interview, it’s important to go beyond those kinds of questions and ask about how their team is structured. Far too often, advisor teams are “advisor-centric,” but you should look for a “client-centric” team.
Advisor-centric teams are simply a group of individuals sharing office space and staff so that when they’re on vacation, there’s somebody to answer the phone. That’s not likely what you want. You want a team where each person is there to serve your needs, not the lead advisor’s needs.
To help you determine whether they are client-centric or advisor-centric, ask them targeted questions:
- Do the advisors have different areas of specialization?
- Will I meet with more than one advisor?
- How do I know who to call with questions or service needs?
- Will I be working with other members of your team?
- Who do I call if you’re not available?
Ultimately, look for an advisor team that is more like a close-knit, winning basketball team—where everyone has a unique area of specialty, but the whole team functions
as one collaborative unit. Try to avoid those that are like a golf team, where each person competes individually and only totals their scores at the end of each round.
#4: Focus on standard of care
Along with everything else we’ve discussed, it’s important to consider the prospective advisor’s standard of care. A standard of care approach to wealth management ensures nothing slips through the cracks as you reach major milestones, such as planning for your children’s education and caring for your aging parents.
Your advisor should be able to help you identify and address all of the challenges you and your family will face now and down the road. To do this well, we’ve found having key team members dedicated to fulfilling this role is necessary.
This is one of the things that sets great advisors apart from mediocre ones, so don’t neglect to ask about how they approach standard of care. Remember, you are looking for a financial advocate who will be an asset to you throughout your life.
The issues you face now are different from the ones you’ll face in the future. Your advisor should understand this and be prepared for it.
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Hire the best fit for the job
While this is by no means an exhaustive guide to picking the right financial advisor, it will help you make an informed decision about who you choose to serve you. After all, there are plenty of advisors out there who can help you do some financial planning or help you with your investments. However, those are just basic skills that advisors should have.
We believe what sets the best advisors apart from the rest goes beyond those skills. It comes down to whether you feel comfortable with them and whether you are both a good fit for each other. It comes down to whether their team is there for you or for them. And, it comes down to the standard of care they can offer you.
By thinking through each of these things, you can help ensure that the advisor you hire is the best fit for your individual needs—not just now, but for years to come.
