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How to Pick a Financial Adviser or Planner

Anyone can call himself a financial planner.

Think about that for a second… anyone can call himself (or herself) a financial planner.

Given that, and the alphabet soup of certifications and titles, how in the world is someone like your or me supposed to effectively sift through the bums to get to the gems? I spent a few hours talking to a “financial planner” several years ago and while he was a nice guy to talk to, he did more than offer up a few high priced mutual funds and insurance ideas. While the talk did introduce me to the idea of disability and term life insurance, I wasn’t really interested in learning more about them at the time and so our relationship ended. Was he a good planner? I have no idea because I have no way of determining that.

Fortunately, a two year old article on how to evaluate a financial advisers from MarketWatch [3] is still pretty accurate. They recommend that you review three factors in a financial adviser:


First, you have evaluate their general credentials such as years of experience, number of clients, college degrees, and certifications. A planner should have a CFP (certified financial planner) certification from the CFP Board of Standards, Inc. [4] and you can confirm this by using their search tool [5]. An adviser should be an RIA (registered investment adviser) if they have their own firm or be an IAR (investment adviser representative) if they are independent contractors. RIAs and IARs will be registered with the Securities and Exchange Commission, you can look them up at the Investment Adviser Search tool [6]. An IAR or an RIA is not a certification, it’s merely a sign that the individual or firm is registered with the proper government agencies. It’s mostly paperwork, but something that should be done by reputable firms (Thanks Lily!).


Get the adviser’s or planner’s CRD (central registry depository) number and look them up at the FINRA (Financial Industry Regulatory Authority) BrokerCheck tool [7]. This can tell you if there are any problems with the person you’re looking to deal with. Another suggestion they give is to check to see if your adviser has a criminal record because a criminal record doesn’t prevent someone from obtaining a securities license (surprising, but true). That being said, a criminal record doesn’t necessarily mean the person is a bad adviser or hasn’t been reformed but to each their own.

Business Practices

Ask how the adviser is paid. The rule of thumb is that you always want to pay an adviser for their time, i.e. a fee-only adviser, rather than someone who earns a commission based on the investments you choose. In my case, my adviser a few years ago was free but earned a commission when I bought insurance or mutual funds through him. That always brings up the question of conflict of interest, is he steering me towards a product because it’s the best one for me or because he earns a commission? After figuring out compensation, talk about how you will conduct business. How often will you meet, how often will you talk on the phone, who else will join you in meetings, etc. Get a good feeling for how things will proceed.

Lastly, they recommend that you don’t choose someone based on their personality or sales skills, which I agree. However, after you’ve done your due diligence in the three areas outlined above, I think it’s important that you do pick someone who you can get along with. It should be the last gate in the decision making process, not the only gate.

Jeremy at GenXFinance just pointed me to an article he wrote for About.com, “the best article ever written on the subject,” Finding a Financial Advisor [8] that I found pretty informative. (Best? I don’t know… but pretty good :))

Do you have an adviser or planner (or are you a adviser or planner) and have any insight into this?

(Photo: pgoyette [9])