Seven Key Items to Consider Before You Hire a Financial Advisor

Steven Zeller |

Often times, choosing an advisor can be a difficult and overwhelming process. Financial Advisors come in every shape and size and with a variety of qualifications. They work for big companies on Wall Street down to small firms on Main Street.

The good news is that a careful examination can be done to help make your advisor search easier. There are several essential items to consider when selecting a financial advisor that can be used as a guideline to help you through the process.

Things you should be aware of when choosing an advisor:

1. How do they get paid?

In the previous twenty years, the financial profession has created a lot of debate and negative media because of its compensation arrangement. Often times the type of compensation that is most vulnerable to producing problems within the client-advisor relationship is in the form of commission.

A commission is a fee that is paid when an investment product is sold, which is often not disclosed to the client. The product can be an investment or insurance, such as life insurance, long term care, or an annuity. This commission rewards the advisor for placing the client into a product, not for providing advice or guidance.

Frequently, the advisor is then motivated to suggest products so they can get paid, which destroys the real premise of remaining unbiased and impartial for the client. The best course of action for someone looking for the help of a financial advisor is to search for one that is compensated by a "fee for service."

In addition, it is worthwhile to seek out an advisor that does not get paid by any commission-based product which could include limited partnerships, annuities, mutual funds, and all forms of insurance.

2. What is their knowledge and experience?

As with all professions, knowledge is critical, even if their business has been in existence for quite some time, because their organization can't oversee each piece of guidance and direction they would be providing you. Make certain that the potential advisor has a sufficient amount of experience.

3. Is their regulatory record clean?

It is essential to know the prospective advisor's ethical record. The easiest way to find this information is by exploring their records through the regulatory agencies. The most trusted resource is the FINRA website - You can also make inquiries through the SEC if they are a Registered Investment Advisor. If they are a CERTIFIED FINANCIAL PLANNER Professional, you can make inquiries about them through the CFP board.

4. Do they have any credentials?

This is imperative for several reasons. First, it is a sign of their knowledge, expertise and proficiency within their profession. Some legitimate qualifications to look for would be CFP®, CERTIFIED FINANCIAL PLANNER, CFA, Chartered Financial Analyst, and ChFC. The most admired for financial planners is the CFP®.

Second, it helps you decide whether or not their heart is in their profession. The majority of these credentials involve quite a lot of effort and devotion to acquire.

5. Do they use a proven Investment Process?

One of the major reasons why people get themselves into trouble when investing is because they never hold fast to a stringent discipline. This goes for an advisor as well. It is astounding how many advisors position their clients into the market without an established investment process in place.

When a severe market decline occurs, their clients frequently suffer more than they bargained for. Make sure the potential advisor has been using a demonstrated investment process that has a track record of withstanding severe market environments.

6. What planning services do they offer?

There are several important areas within the sphere of financial planning that the advisor needs to be skilled in and can display that they have provided. You should acquire a careful understanding of all the areas of planning that they provide, and possibly see some examples of their work. This will assist you in getting a better idea of the level of their proficiency and the quality of their advisement.

7. What is their longest client relationship?

Finding out how long their clients have been with them will tell you how satisfied their clients are, and how long they have been providing a superior of service.

While there are several items that you ought to consider, the key is to prepare yourself in advance with the right questions so that you can make an educated decision.


Steven Zeller, Advisory Services offered by Zeller Kern Wealth Advisors, a Sacramento Wealth Management firms and a Registered Investment Adviser.