How to Find a Great Financial Adviser

by Vincent King · 4 comments

Dan’s tried to build his financial portfolio for years, but he’s not gotten far. He’s finally reached the point where it’s shut up or put up. He needs an adviser.

Unfortunately, Dan has no idea how to hire a financial adviser, or find the one that’s right for him. Too many options make things confusing.

Here are nine things that Dan should consider when hiring a financial adviser:

What to consider when hiring a financial adviser

1. Background

Dan should be looking for a solid job history and good credentials. Someone who’s hopped from job to job isn’t likely to be the right candidate, because they’re probably not focused on their customers as much as themselves. Dan should look for an adviser who will have his best interests in mind.

2. Success rate

In this rocky market, it’s hard to succeed if the adviser doesn’t know what she’s doing. Dan should check references. Past clients, if happy, will be excited to tell him about what Adviser J has done for them. Those who aren’t will run to tell him why he shouldn’t go with her. The key is to request references from past clients — not just present.

3. Accessibility

When Dan calls, his adviser should be available. Period. If not every time, almost always. Those times when he’s not, Dan should promptly receive a call back. If the adviser Dan chose turns out to be someone that’s hard to reach, it’s time to start shopping around again.

4. Reaction time

How quickly an adviser reacts to hiccups or market movements is an excellent indicator of her abilities. This is a great question to ask those past references: did the adviser always respond promptly to market shifts, or was she slow to take action? Even if Dan hires this adviser, he should keep track of these market changes, so he knows if and when it’s time to shop for a new adviser.

5. Return chaser

Another question to ask those referrals: did the adviser in question have a habit of having them chase returns? In consistently jumping from investment to investment in the name of earning a little extra, these investors ended up paying more in transaction fees than necessary.

6. Roadmap

Will this prospective adviser (happily) provide Dan with a roadmap of his plans? If so, did this adviser stick to his plan as much as possible? There will be times when that can’t happen, but if veering from the plan occurs because she “forgot” about the roadmap, or because of a whim, Dan should think twice about hiring her.

7. Attentiveness

During his shopping, Dan ran into an adviser who must’ve been an auctioneer in her previous life, because Dan barely got one word in the conversation. Though he tried to communicate his needs, the adviser was busy telling him what he should and shouldn’t be doing. A terrible sign. This is another excellent question for past references.

8. Clarity

If Adviser X is unclear in her explanation, Dan should try to get clarity. If the adviser can’t or doesn’t want to make things less confusing, Dan should keep walking. Again, clarity is another great topic to open with references.

9. Knowledge

Above all, Dan deserves an investor with knowledge. Someone who knows what products Dan should be investing in to make the most of his hard-earned dollars. He could ask the references to scale this adviser’s product knowledge to help get a bigger picture of how she works.

Dan now knows what he needs to do to find a good financial adviser; it’s up to him to get out there and do his homework.

Summary of Questions for References

1. How long had they been together?
2. Was she successful for them?
3. Was she accessible when they needed her?
4. Was she always quick to react to market shifts?
5. Did she have them chasing returns, no matter how minimal?
6. Did she provide a written road map? And stick to it?
7. Was she attentive when they talked?
8. Was she clear in his explanations when they asked questions?
9. Was she knowledgeable about products they needed?
10. Finally, why did they leave her?

What are your tips for finding a great financial adviser? 

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

{ read the comments below or add one }

  • Steve says:

    An advisor who “is always available” when you call must be pretty bad. Shouldn’t they be busy? Also, if you and every client of the advisor speak with him/ her on a regular basis, when is the advisor spending time studying markets, watching trends, etc.? And even if they do spend time, are they qualified to do this? Having a financial planning degree doesn’t make an advisor a money management expert. Truth be told, most advisors are salesman whose primary function is to make a living, and the more the better. Many now charge a fee to put you into mutual funds and/ or ETF’s. I’d suggest most can do this themselves.
    Do you really want a manager who reacts to things in the market as opposed to proactively making recommendation? Unfortunately, most advisors react and only make changes during client reviews, usually after the fact.

  • Property Marbella says:

    Draw up a contract that says how many “quick trades” he may do without your approval. Many financial advisors earn their money on transaction costs so he/she may want to do as many as possible with your money whether it benefits you or not.

  • John S @ Frugal Rules says:

    These are all great tips and ultimately I think it comes down to having someone who knows what your needs are and is accessible. If they don’t understand what you need, then they can’t really direct you appropriately.

  • Troy says:

    Great post. Luckily, I don’t need a financial advisor (because I’m a professional investor). Maybe some day I’ll start a fund to help manage the money of a couple of relatives/friends.

Leave a Comment