How can you choose the best financial advisor?

2 Understand the types of advisors

Not all financial advisors are the same; they offer different levels of service, expertise, and regulation. For instance, a Certified Financial Planner (CFP) is a professional who has completed a rigorous certification program and follows a code of ethics and fiduciary standards. They can provide comprehensive financial planning advice on various topics. A Registered Investment Advisor (RIA) is a firm or individual registered with the Securities and Exchange Commission (SEC) or a state regulator, providing investment advice and portfolio management with a fiduciary duty to their clients. Broker-Dealers are firms or individuals licensed to buy and sell securities on behalf of their clients or themselves; however, they are not required to act as fiduciaries and may receive commissions or incentives for selling products or services. Robo-Advisors are online platforms that use algorithms and technology to provide automated investment advice and management at lower fees than human advisors, making them suitable for simple and passive investing.

3 Compare the fees and compensation

When selecting a financial advisor, one of the most important aspects to consider is how they charge for their services and how they are compensated. Advisors can charge fees in various ways, such as an hourly rate, a flat fee, a percentage of assets, commission from products or services sold or recommended, or a combination of these methods. It's essential to compare the fees and compensation of different advisors and understand how they match up with your goals and budget. Additionally, you should request a written disclosure of all fees and commissions that the advisor may receive and how they may impact your returns.

4 Check the credentials and reputation

When selecting a financial advisor, it is essential to consider their credentials and reputation. Make sure the advisor has the appropriate licenses, certifications, and registrations to provide the services they offer. Additionally, you should check if the advisor has any disciplinary actions, complaints, or lawsuits against them. You can use FINRA BrokerCheck to search for and review the background and history of brokers and firms. The SEC Investment Adviser Public Disclosure tool allows you to search for and review the registration and disclosure information of investment advisers and firms. The CFP Board website verifies the certification status and disciplinary history of CFPs. The BBB website enables you to check the ratings, reviews, and complaints of businesses and professionals.

5 Interview potential advisors

Finally, when interviewing potential advisors, you should ask relevant questions to evaluate their suitability for your needs. Consider topics such as experience, services, philosophy, fees, and references. Ask about their length of time in the industry, the types of clients they work with, and their areas of specialization. Furthermore, inquire about the services they offer and how they deliver them. Additionally, you should inquire about their investment philosophy and strategy, how they measure and report performance, and how they handle risk and volatility. Lastly, ask about fees and potential conflicts of interest. Compare the answers and impressions of different advisors to choose the one who best matches your goals, preferences, and personality.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?