Our "gold standard" concept is for people who are looking for substantial advice and guidance from a personal financial professional. This guidance uses the term “advisor” to describe this type of professional relationship.
Investment professionals generally come in two varieties; registered investment adviser representatives and broker-dealer agents. As is explained in more detail below, registered investment advisers typically offer a greater depth of services and advice than broker-dealer agents, and are an appropriate choice for someone looking for substantial investment advice and account monitoring. On the other hand, if you are simply looking to buy or sell stocks, for example, you can readily find a broker-dealer to execute your transaction. Read on, and apply the “gold standard” if you are looking for advice and guidance from a personal financial professional.
Place your interests above the advisor’s interests and those of the firm the advisor represents.
Require that the advisor acts with care, skill and diligence with regard to your goals and personal circumstances.
Make sure the advisor is registered as required by the Securities and Exchange Commission, their state regulator or the Financial Industry Regulatory Authority (FINRA).
The advisor should be experienced weathering ups and downs in the market.
The advisor should have experience with clients in similar situations to yours.
Comprehensive financial planning, if that is what you seek, includes but is not limited to:
Fee-only advisors are compensated by their clients for the advice and services they provide. They do not accept commissions to sell particular products. Clients pay fee-only advisors a flat fee, an hourly rate, a retainer or a percentage of assets under management (AUM).
Advisors should avoid conflicts of interest at all costs. When a conflict is unavoidable, it would have to be disclosed and managed.
There should be a written, personalized plan provided.
A full-service financial advisor, for example, will provide additional services beyond buying or selling securities on your behalf, such as providing advice and a written analysis of your personal financial situation. It should be a red flag to you if the advisor you currently work with, or someone you are considering, will not provide a written analysis.
An annual review is a best practice for advisors. You may meet more frequently, including leading up to, during or following a major life event. Whether it is quarterly, annually or some other time frame, it’s important to know how often you’ll meet with the advisor so you both have the same expectations.
The advisor should not have faced disciplinary action. The U.S. Securities and Exchange Commission, your state securities regulators and the Financial Industry Regulatory Authority (FINRA) provide free reports on the disciplinary history of financial advisors. You can follow up with these authorities to verify whether there's a history of disciplinary action or customer complaints.
Understand the difference in financial professionals.
“Broker-dealer" and "registered investment adviser" are terms defined in federal and state securities laws, and they define the legal obligations of these professionals. Other optional titles may relate to certifications and designations the advisor has earned.
Broker-dealers and registered investment advisers may have similar roles, but there are important differences. Some of the key differences are highlighted in the chart below.
The process of finding a financial advisor to work with can seem overwhelming and intimidating.
Our guide takes the mystery out of what questions you should ask when you interview an advisor. In preparing for your consultation with your advisor, please use the following steps:
You may go to an advisor with an open mind to hear about services, but you’ll want to think about how an advisor will be most beneficial to you. Here are some subjects for you to consider when thinking about how to use your advisor.
Be sure to know what your financial success looks like to you. You want an advisor who will work in your best interest, make decisions in your best interest and make decisions with your goals in mind. Having an advisor who helps you craft your goals and ensure that they are realistic can be beneficial as well. But it’s important that the advisor is starting the consultation with what you want instead of selling you services and products that do not match your desired short-, mid- and long-term outcomes.
Take time to think about what you would like to accomplish financially over the next year, five years and/or a longer time frame. Your advisor may challenge you on some of your goals, which is fine. But be sure that they lead with understanding your goals.
Any details that you can’t find on the site, add to the questions you plan to ask in person.
Ask the advisor the following questions during your in-person or phone meeting. Feel free to add or omit questions based on what you’ve learned from previous research on the advisor.
Think back on your meeting and see how the advisor performed against these criteria. Take the quiz below:
Think back on your meeting and see how the advisor performed against these criteria.
An email will be generated with all preselected questions that you can copy and send to your advisor.
Experiences & working relationships
Services and products
Experiences & working relationship
Experiences & working relationships
Services and products
Good day, _____________, Thank you for taking the time to meet with me to discuss the ways in which we can work together. After our consultation, I have a few additional questions to gain clarity about your service offerings: