How to Choose a Financial Advisor

If you’re sorting out the financial decisions around retirement or estate planning, or wondering how you can help your kids or grandkids finance their education, a financial advisor can help.

It can be difficult to understand an advisor’s credentials, how their business is structured or whether your personalities click, however. For example, advisors are paid in numerous ways, and the arrangements can be tough to understand at first.

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A financial advisor does much more than crunch numbers for clients. Simply by the nature of the work, advisors often become a confidant privy to many details of clients’ lives. For that reason, an advisor has to be not only technically competent, but also emotionally intelligent.

“Seeking a financial advisor can help add an element of impartiality to your financial decisions,” says Justin Haywood, a certified financial planner (CFP) who’s president and co-founder of Haywood Wealth Management in Houston, Texas.

“Money is inherently emotional, and an advisor acts as an objective party to remove as much emotion from the equation as possible,” Haywood says. “Whether you’re planning for retirement, managing investments or navigating complex financial situations, an advisor can provide the expertise and detached perspective necessary for sound decision-making.”

— Why you should get an advisor’s help.

— Important factors beyond credentials.

— How important is chemistry when choosing an advisor?

— How important are soft skills, such as showing empathy?

Why You Should Get an Advisor’s Help

Do-it-yourselfers often realize that managing every aspect of their own finances is a complicated endeavor. While many people believe they can handle their own investments, eventually, the array of choices can become daunting. Also, investors without strategies for withdrawing from qualified and taxable accounts may end up paying more in taxes.

Estate planning is another area where investors can benefit from a roadmap rather than just winging it.

“Some people want to work with a financial advisor because they know they don’t have the time, energy or education to create a financial plan on their own,” says Wes White, founder of Patriot Wealth in Raleigh, North Carolina.

“Creating and maintaining a comprehensive financial plan takes more time than most people have to dedicate,” he adds. “Working with a financial advisor frees you up to focus on the things that matter most to you, like pursuing your career or raising your kids.”

White notes that working with a financial advisor brings an objective perspective to one’s financial decisions.

“An advisor is not as emotionally invested in your money as you are, so they can provide you with information and viewpoints that you might otherwise overlook,” he says.

Important Factors Beyond Credentials

If you’re considering hiring a financial planner or advisor, it’s important to not only look at that person’s credentials, but also at factors such as their experience, communication style and how the advisor is compensated.

For example, do you pay a separate fee for planning, or is it included with asset management? Do you pay a percentage of assets under management, or are you billed using a flat fee or subscription system?

“Fees are always the elephant in the room,” says Kris Maksimovich, president of the Lewisville, Texas headquarters office of Global Wealth Advisors. “The better a financial advisor can explain the fees they charge and what they cover, the more easily a client can decide if the cost is worth it,” he says.

Maksimovich added that the level of independence often drives how an advisor gets paid.

“Some earn commissions on product sponsorships and others fees. While the term ‘fee-only’ is often highly regarded, be aware that the advisor might be limited in their product offerings,” he says. “Independent fee-based firms may offer a more comfortable coexistence because they are free to offer a wider array of products more suitable for a client’s particular needs.”

In addition to fee structure, prospective clients should look for an advisor who shares their values.

“You want to make sure their view of money aligns with yours. Some people care about growing a large nest egg, while others want to give their money purpose for generations to come,” Maksimovich says. “No matter what your financial planning goals are, it’s crucial for you and your advisor to be on the same page.”

How Important Is Chemistry When Choosing an Advisor?

Establishing a good connection with your financial advisor is crucial for open communication and trust. A strong relationship ensures that your advisor fully understands your financial goals and personal circumstances. Without that, you risk getting cookie-cutter advice, or potentially even worse: a plan that doesn’t align with your situation.

“Chemistry is vital because, without a good rapport, clients are less likely to heed the recommendations of the advisor,” Haywood says. “This relationship is built on trust and mutual understanding, and without it, the advice given may not lead to the desired outcomes.”

He adds that a strong personal connection ensures that communication is clear and that the advisor truly understands the client’s needs and goals.

“Financial planning is a highly relational business. It’s not a transactional service; it’s all about building trust,” White says.

He says that financial advisors help their clients navigate intimate events like the loss of parents and spouses, the birth of children and major life changes such as losing a job or moving.

“All of these events impact your finances, and having a trusted financial advisor can help alleviate some of the financial stress during those times,” he says.

How Important Are Soft Skills, Such as Showing Empathy?

Credentials such as the CFP designation, or others, such as chartered financial analyst, certified divorce financial analyst or chartered life underwriter show commitment to advanced knowledge within the profession. Would-be clients should understand what credentials an advisor has, and whether they specialize in certain aspects of financial planning and advising.

However, when looking for an advisor, don’t forget about factors such as listening skills and ability to understand a client’s situation beyond the numbers.

“The personality of your advisor is completely a personal preference,” says Matt Ahrens, partner and chief investment officer at MarksNelson in Overland Park, Kansas.

“Over time, we truly think of our clients like family, but some clients prefer to not get too friendly with their advisor in case the relationship deteriorates and they have to go another direction,” Ahrens says.

“In general, I think it’s a good idea to work with an advisor you get along with, because these can be lifelong relationships,” he says. “Your advisor needs to both be willing to listen to you, and to push back when they feel you’re making a poor financial or life decision.”

He says it’s often difficult for a client to gauge the true level of an advisor’s knowledge and competence.

“Someone not well versed in investments won’t know that mutual funds shouldn’t be in an after-tax account, because they’re not tax efficient,” Ahrens said. “Clients likely won’t know that an advisor claiming to beat the S&P 500 in both bull and bear markets is probably lying.”

A firm with numerous advisors may fill in knowledge gaps by using a team approach that includes a planner, a chief investment officer or advisors with specific expertise such as tax planning, insurance planning or divorce planning. A smaller firm may rely on collaborations with outside professionals. Either approach may be viable, depending on the situation.

“Ask your CPA or estate planning attorney for a referral to an advisor they would recommend,” Ahrens says. “They meet with financial advisors on a regular basis and should have a good handle on who does a good job and who does not.”

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How to Choose a Financial Advisor originally appeared on

Update 07/10/24: This story was previously published at an earlier date and has been updated with new information.

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