Sometimes we need the help of others. This is a fact of life, and one that also applies to our financial decisions. That's why some of us will seek the services of a financial advisor. Whether we lack the time to do a lot of investment research ourselves or we feel the need for a professional opinion, financial advisors can be convenient and helpful.

But you don't want to rush out and hire just anyone. Choosing a financial advisor is much like buying a car: It's a big decision, so you must consider many factors and know your criteria before making your purchase.

First Impressions

Financial advisors make their first impression by their designations. Their professional status is shaped by the kind of education they have or the letters behind their names. Of course, the more letters there are, the more there is to indicate that the planner has extensive knowledge and commitment to his or her industry.

However, a financial professional may have letters that look good but are actually quite limited. There are now many different types of certifications, and not all have the same importance or weight, so make sure you know what the designations mean.

Reputation and Performance

You may want to look for a financial advisor who has a longer track record, or you may decide to take a chance with a recent graduate who is building the foundations of his or her reputation. Typically, financial advisors who have been around for a long time with a good track record will cost more than new graduates with little experience. That's not to say that the new graduates can't help you make profits or save money, but they do come with more uncertainty.

Experience is always an asset, but a long track record is not worth much if it isn't a good one. Make sure you find out whether your prospective financial advisor has had many complaints—and if so, look into how they were resolved. You can look into the advisor's track record simply by asking about it, but you can also find out more by searching through the SEC records yourself.


You want a good relationship with your financial planner, who must exhibit a high willingness to communicate well with you. Ask yourself the following questions when reviewing your financial advisor relationship:

  • Does he or she plan to meet or speak with your regularly?
  • Will there be routine checkups, or does he or she plan to contact you only when something bad is occurring?
  • How often will your portfolio be revisited?
  • Does he or she exhibit a strong willingness to understand what goals you have set out, and has he or she thoroughly explained the intended approach to reaching these goals?

A financial planner working for one financial company probably won't encourage you to look at what another company offers (although some advisors will). However, a financial planner should primarily look out for your interests, and to do so, a certain degree of independence is needed. Make sure you determine whether the advisor is occupied foremost with helping you make financial gains or preoccupied with the obligation to make profits for a large mutual fund or investment company.

Your choice of financial planner will serve you best if you have a clear understanding of your needs and goals. While the meat of financial planning is typically the same everywhere, the available options and extras make a difference. For instance, does your planner offer tax advice, and what type of investment strategy do they offer? Would your planner handle all of your investment accounts or only your retirement account? Make a list of exactly what you need from a financial professional, and then determine whether they offer you the appropriate services for the price you would be paying.

The Bottom Line

Deciding on the right financial planner is an important step that requires you not only to do some research and shopping around, but also to think about what you need and expect. Keep in mind that this article provides only a basic guideline of what you need to consider, so take your time and make sure you've covered your concerns. A bad decision on a financial planner can be a long-term burden in more ways than one. A poor advisor will not only prove to be a wasted expense but also a cause for lost profits, money-saving opportunities and even sleep!