How Do I Find a Good Financial Advisor?

Choosing the right financial advisor for you can be a difficult process as there are many nuances that are not discernable at first glance. Unlike choosing a car or where to go on a trip, initial impression or outward appearance many not provide a suitable, full picture in comparing advisors.

Two advisors with the same designations and investment philosophies may provide very different levels of service.

There is also no single attribute that can singlehandedly guarantee that someone would make a good financial advisor for you. Age, experience, certifications, independence, investment philosophy, and communication style are all characteristics that can matter. In addition, these components should be evaluated in the more specific context of the client’s circumstances.

What Certifications Should a Financial Advisor Have?

One of the first things prospective clients can simply investigate is whether an advisor has professional designations or a team of such qualified members. The financial service industry has an extensive compilation of designations, licenses, and certifications, but they do not all mean the same thing.

For individuals seeking comprehensive financial planning, for example, the Certified Financial PlannerTM certification is one of those worthy of respect.

Undoubtedly, a common assumption is that someone who has only been in the industry for a few years cannot possibly provide high-quality advice. However, one who has obtained a respected certification and works within a strong planning organization may prove extremely capable.

This should not be misconstrued to indicate that certification replaces experience; yet, they do provide additional information that the advisor has made a serious investment in developing technical knowledge with the field and continues to adhere to high standards as required by that governing body.

For additional perspective on professional designations, read Summit’s article, Designations Matter: Why I Pursued my CFP® Certification.

Why Does Financial Advisor Experience Matter?

Although youth should not automatically be viewed as a disadvantage, experience should by no means be discounted either. Advisors who have spent decades working with clients likely have encountered recessions, bull markets, bear markets, changing tax laws, business sales, inheritance, retirements, divorces, and other major financial events multiple times.

In short, with that experience comes the value of potential familiarity. However, this familiarity may potentially lead to a lack of diligence.

Just as investors who have experienced significant losses and have seen recoveries before, an advisor is more likely to handle such situations more effectively if having already been in a similar experience before

. Complications in concentrated stock positions, estate planning, and charitable giving are a few categories in which experience can go a long way. Having a deep bench at a financial advisory firm may go a long way in servicing clients.

Should You Choose a Younger or Older Financial Advisor?

For some investors, a younger advisor can provide excellent service when paired with strong education background and professional certifications. They may be more comfortable with technology and approach financial planning for a more modern perspective, rather than an outdated one.

However, as already mentioned, years of experience may prove valuable when a client has an unusual situation and an advisor has had previous experience with that same type of situation previously.

What Is an Independent Financial Advisor?

Another significant consideration is whether an advisor is independent. At a basic level, investors should understand to what degree an advisor is limited or flexible in the financial products and investments he can offer.

One advisor working at a big-box institution may have access to only a specific, approved menu of products while the independent advisor may have a plethora of options over and above this.

On the other hand, an independent advisor may arguably have less resources available to him in order to service clients more effectively.

Why Is a Financial Advisor’s Fiduciary Obligation Important?

Most significantly, the advisor’s business model should be verified not to conflict with his client’s best interests.

An advisor with a fiduciary obligation to his clients (i.e., working under a properly licensed Registered Investment Advisor as an IAR) promises to uphold his client’s best interests above his own legally—understandably something that should be in the forefront of requirements for one’s financial advisor (U.S. Securities and Exchange Commission, 2019).

For answers to common questions about Summit’s independence, fiduciary responsibilities, and compensation, visit our frequently asked questions.

How Do You Choose the Right Financial Advisor for Your Needs?

The goal, therefore, should not necessarily be to find the oldest advisor, the youngest advisor, or the advisor with the most impressive title or certifications. Instead, the objective should be to find an advisor who is appropriately qualified, experienced enough for your needs, has values that align with your own, and will put your interests ahead of their own.

Key Takeaways

• The best advisor may have a lot to do with a resume, yet specific background, values and independence might be more important.
• Though they may lack some experience, younger advisors can offer meaningful advantages, particularly when they have strong professional certifications, modern technical knowledge, and a willingness to employ advanced planning tools.
• Experience remains extremely valuable and irreplaceable, especially when dealing with unusual planning situations or inordinate market volatility. Though experience may potentially lead to lack of diligence.
• Independence may also matter significantly. An advisor who is not tied to a specific investment company’s products has inevitably greater flexibility when providing recommendations, but may lack resources in providing efficient services.

Have Questions About Choosing a Financial Advisor?

If you have any questions about retirement, your individual investment portfolio, our 401(k)-recommendation service, or anything else in general, please give our office a call at (586) 226-2100.

Please feel free to forward this article to a friend, family member, or co-worker.

If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.

Best Regards,

Daniel A. Ladzinski, M.S., CFP®, CRPC®, AWMA®, MPAS™

with contributions by Robert L. Wink, Kenneth R. Wink, James D. Wink, Zachary A. Bachner, CFP® and James C. Baldwin