How to Choose the Right Financial Advisor: What Questions You Should Always Be Asking


There are seemingly an endless amount of financial advisors in every city. Choosing the right one can be a daunting task. It is an extremely important decision that is more complicated than a quick Google search or a brief look through the Yellow Pages.

Financial advisors come in all shapes and sizes. Some work for big investment firms while others run independent organizations. Some work for commissions and others work on a fee-only basis.

The title of financial advisor is not a legal term.

In other words, anyone can claim to be a financial advisor while having no actual credentials. 

While a license is not actually required to work as a personal financial advisor, any advisor who sells stocks, bonds, mutual funds, insurance, or real estate may need licenses to perform these types of services.

Financial advisors at big companies will usually require their advisors to be licensed to back up their claim that they can or should be offering you advice.

But acquiring these licenses are not complicated and it is just a matter of paying a small fee and waiting for the availability to take the next test.

Some of these licenses include the Series 63, the Series 65 and the Series 66.

These three licenses can be acquired in total for under $500. 

While any advisor you hire should have these three licenses, the Chartered Financial Analyst (CFA) title is a bit more reassuring for the consumer.

Financial analysts may receive the title CFA, sponsored by the Association of Investment Management and Research. To qualify for CFA designation, applicants must hold a bachelor’s degree, must have 3 years of work experience in a related field, and must pass a series of three examinations. The essay exams (Level I, Level II and Level III exams), administered once a year for 3 years, cover subjects such as accounting, economics, securities analysis, asset valuation, and portfolio management.

Go to the FINRA website to look up any advisor you are considering working with. This website will show all of the information on the advisor, including what tests he has passed and if he is up-to-date on those exams. Need help finding an advisor? Find a local advisor to you and see what your best options are with no obligations.

If you have a financial advisor who is only interested in selling you one product, such as an annuity (unless that is the only product you are interested in), then it may be time to find a new financial advisor. You want your advisor to give you multiple options on products and strategies. Any advisor who seems to only be interested in you purchasing one particular item should be treated cautiously. It never hurts to get a second opinion.

Even if you are only looking to purchase a very specific product such as an annuity, it is often a better idea to seek out an independent financial advisor who can give you comparisons of the different products available on the market. If you go to a big investment firm  advisor such as Prudential, they are more than likely only going to show you products from Prudential. This is not to single out Prudential which has many excellent products available, but rather just to point out that shopping around is a good bet.

Shopping around consists of more than just seeking the best annual rate of return. Different products are suited best for different people in different situations.

If you were looking to buy an SUV, it would probably be smart to not just look at Jeeps but rather see what other options are available from Honda, Toyota, Chrysler, GM, etc. They all make SUVs after all.

The bottom line is no matter what exams or certifications the advisor may have, it is your responsibility to ask questions and seek out full disclosure on what product the advisor is pushing towards you. Don't stop there. Find out what the advisor gets out of selling you this product. You have the right to ask how much commission the advisor will receive. Find out what their firm specializes in and what types of clients they usually serve. Do they work solely with you or is there a team of advisors who could be handling your portfolio?

These are among some of the questions you should research for when looking to find a trusted advisor.