top of page

10 Things to Look for When Choosing a Financial Advisor in 2023

Updated: Jul 13, 2023

Did you know there are roughly 100 different types of professional advisor titles to choose from?

Here are a few of the more common: financial advisor; wealth advisor; wealth manager; fiduciary advisor; investment manager; investment advisor; wealth planner; financial planner; financial manager.

Once you've spent a few months researching each to determine which one is right for you, you have the luxury of assessing the varying compensation structures, including: Commission-based; fee-based; fee-only, flat-fee, retainer and hourly.

Should you hire a fee-based fiduciary planner or a flat-fee wealth advisor?

Before deciding which financial advisor to hire, it's best to start by understanding the basics.

The marketplace for financial advice has become increasingly difficult to navigate, especially in recent years due to technological advances, new fee structures and fancy titles. You'll be entrusting your entire life's savings with this person so it pays to do proper due diligence.

At the very least, start with the following:

Know the Term "Fiduciary" - A fiduciary is someone who is legally required to always act in your best interests. It's the highest standard in the financial industry and something you'll want to put at the top of your checklist when selecting a financial advisor.

Now, fiduciaries are required to maintain a written statement of their fiduciary status. Here is an example of such statement and something you may want to ask for before agreeing to work with an advisor.

Broker Check - If you have a few names of advisors you're considering, check and see if they have any prior disclosures on record. Broker Check and IAPD are two great resources for looking up an advisor's professional background, conduct and disclosures related to disciplinary actions, if applicable. If there are any red flags, you should know beforehand.

Website Review - Has it been updated in the past 10 years? Is it easy to navigate and find contact information? Does the content speak to you personally? Does a website even exist?

Websites are the new storefronts for financial advisors and first impressions go a long way.

While you shouldn't make your decision based on this factor alone, it's definitely something to watch out for as it may provide insight into how the firm does business, and who they specialize in working with.

After you've done your research and are ready to begin meeting with prospective advisors, here are the 10 most critical questions to ask during the interview process.


Now that you know what a fiduciary is, it's best to position this question first as there are still a large number of advisors who operate as brokers and are held to a lesser standard of care - suitability.

To illustrate the differences between fiduciary and suitability, assume you're in the market for a new SUV but on a tight budget. You can comfortably afford to spend between $40,000 and $50,000 and want to be sure the vehicle is safe, durable and has 4-wheel drive. You go to the dealership and there are only two vehicles for sale: A lightly used Lexus priced at $53,000 and a new Honda priced at $48,500; both with the same levels of safety, durability and 4-wheel drive.

A broker being held to the suitability standard may recommend the Lexus and offer to spread the payment over 7 years at a slightly higher interest rate in order to remain close to your budget and suitably fit your needs.

A fiduciary would be required to present the Honda because this vehicle is in your best interest.

Let's dig a little deeper still.

Even if the prospective advisor is a fiduciary, you may consider asking how they're registered.

You'll find some advisors are dually registered, meaning they can act as a fiduciary OR a broker when delivering financial advice. So using the example above, they could offer you the Lexus or the Honda and you wouldn't know if their recommendation was in your best interests, or merely suitable.


Some advisors specialize in working with specific demographics of investors such as doctors, divorcees or millennials. Others, like most large banks and institutions serve more of a broad set of clientele and base their service level on of the size of your portfolio rather than a particular niche.

Knowing whether or not the advisor specializes in a certain area may help you better determine if they're a good fit for you.

For example, if you're a small business owner in the process of selling your company, you may be better off working with someone experienced in succession planning and investing for business owners as they may have a unique perspective and skill set in this area, as opposed to an advisor whose ideal client is anyone with $1 million or more in investable assets.


According to financial education provider Kaplan, it takes roughly 150 hours of studying and a passing grade of 72% on the Series 7 exam for someone with a non-financial background to become a licensed broker and receive commissions for selling investment products and financial advice. It takes even less time and the same passing rate on the Series 65 exam to become a registered investment advisor who exchanges investment management for compensation.

While these exams aren't by any means easy, the barriers to entry in the advisory world remain relatively low. That's why it's good practice to look for credentialed advisors who've gone the extra mile to learn and improve upon their financial skills.

Instead of spinning your wheels trying to understand the differences between a wealth manager, financial consultant and investment advisor, focus more on their licenses and designations.

The Certified Financial Planner (CFP) designation is considered to be one of the highest and most respected designations in the financial industry, yet only about 25% of advisors have this certification. In order for advisors to attain CFP credentials, they must successfully complete the required financial planning coursework through an accredited institution which can take 12 - 18 months. Then, they must pass a 3-hour exam consisting of 170 multiple-choice questions and acquire 6,000 hours of professional experience before they're designated a CFP.

Other licenses and designations that further demonstrate an advisor's competency in specific areas include CPA (Taxes & Accounting), CFA (Portfolio Management) and PFS (Personal Financial Planning).


Another important question to ask a prospective financial advisor is what services they offer. Investment management has over time become somewhat of a commodity. Market information is now readily available to the general public making it difficult for advisors to outperform the stock market. And advancements in financial technology have paved the way for institutions to offer investment management services via robo-advisors at a fraction of what it costs to work with a human advisor.

All of these changes have led some advisors to not only reduce their fees, but also offer a wider variety of services for investors including financial planning, debt management, tax services and estate planning to name a few.

So if you're someone with a net worth of $10 million and in a high tax bracket, it may be best to find an advisor who offers tax and estate planning services in addition to investment management rather than someone who only manages investments.


Once you have an understanding of the services offered, you'll want to know the all-in fee. I stress "all-in" because you can be charged multiple levels of fees for investment services, some of which may be hidden, so you'll need to be made aware of them.

On average, the fees charged by a financial advisor start around 1% of investable assets being managed. Additionally, there are fees on the investments themselves which can cost as much as 1.5% for mutual funds and as little as .02% for exchange-traded funds. This means an advisor using all mutual funds may end up costing you 2.5% of your money which doesn't sound like much, but on a $2 million portfolio this equates to $50,000, or the equivalent of driving a brand new Lexus RX off a cliff each year.

That's not to say price is everything. Some advisors deliver exceptional value to the clients they serve and earn every cent of their fee. Just be sure the nature and extent of services being provided match your all-in fee before signing on the dotted line.


Now that you know the fees being charged, you'll want to understand how the advisor gets paid.

A large portion of advisors receive compensation based on a percentage of the assets they manage. If this is the only way the advisor is compensated, they'll refer to their fee structure as "fee-only," meaning just the management fee and no other charges or commissions.

Fee-only advisors may also charge flat-fees, retainers or hourly rates as opposed to a percentage of assets under management.

"Fee-based" on the other hand involves charging commissions where the advisor is compensated based on the products or securities they sell.

Whatever the arrangement is, you'll want to know where your money is going so you can detect any conflicts of interests that may arise.

For example, a fee-based broker may recommend you buy a variable annuity that while suitable for your retirement needs, pays a 5% commission and helps him hit quota for the month.

Or a fee-only advisor charging 1% of assets may advise you to liquidate a piece of investment real-estate and invest the proceeds with her, despite the sizable tax liability you'd incur by selling.

Remember, it's not enough to know what you're paying for financial advice. Follow where your money is going to avoid the potential for conflicts of interest down the road.


This may sound wordy and convoluted but trust me, go with it.

That's because when asked how they manage money, advisors will often respond by citing goal setting, risk tolerance and asset allocation, all of which represent stock answers that almost any halfway decent advisor would address before investing your money.

What you're really looking for is how they manage money after goals have been set, risk tolerance identified and asset allocation established. Are they picking individual stocks? Do they prefer mutual funds, ETFs or a combination of both? Where do they get their research from and why?

Questions like these are more likely to elicit an engaging, thoughtful discussion around precisely how your money will be managed while demonstrating to the advisor you know your stuff.


Let's face it - COVID-19 has brought about more change in the span of 24 months than we've seen in the past 20 years. Companies are now working remotely and changing the way they communicate with their employees and customers.

Financial advisors must be able to adapt to this ever-changing environment and find unique and creative ways to communicate with their clients. Accordingly, be sure the advisor has the technological capabilities and acumen to hold in-person, phone or virtual meetings with you. If they've never heard of Zoom, run for the hills!

On top of that, you'll want to ask how often the advisor typically meets with their clients in a given year, as well as other forms of communication they may provide, i.e. newsletters, emails, blogs, etc. This offers peace of mind of knowing what you can expect from the advisor should you decide to work with him.


Whether you're considering an independent advisor or a large financial institution, it's always good to know where your money is going to be held. Smaller institutions who haven't attained the size and scale of say Charles Schwab may not have the same level of safety features, digital capabilities and insurance protection on their financial products as some of the larger ones.

The three largest institutions providing custody services to independent financial advisors are Charles Schwab/TD Ameritrade (soon to be acquired by Schwab), Fidelity and BNY Mellon, each offering clients their own secure portal to login and view their accounts.

If nothing else, it's reassuring to know your money is being stored in a safe place.


If you really want to put the advisor to the test, ask them who they'd recommend you work with if you don't decide to go with them. The truth is, some clients and advisors just aren't a good fit for each other for whatever reason - personality, goals, demographics, expectations, price, etc.

Financial advisors come in all shapes and sizes. But the great ones have one thing in common: they put helping people first and monetary gains second. So regardless if you feel they're a good match, great advisors will always be honest, candid and willing to help you, even if it means recommending you work with a competitor who's better suited to serve your specific needs.


Like buying a house or deciding when to retire, choosing a financial advisor is an incredibly important decision which deserves scrutiny.

As such, be sure you go to the table well-prepared and ask tough questions. If the answers aren't clear or don't make sense, push back and ask for clarification.

Do your best to weed out advisors looking to make a quick sale and instead focus on the ones who'd rather lose you to a competitor if it means you'll be better served in the long run.

66 views0 comments


Image by Aaron Burden


Want to know how we can help you increase income, reduce taxes and invest smarter in retirement?

bottom of page