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5 Things To Consider While Selecting A Financial Advisor

Ashwin Dhanesha

Ashwin Dhanesha , CPA, EA, CFP, PFS, CFA, MBA |


The term “financial advisor” is a generic term that anyone can use to describe themselves regardless of their educational background, professional experience, and subject matter expertise. Moreover, not all financial advisors are required to be impartial and act in their clients’ best interests. This creates confusion for consumers who may be searching for a well-qualified and unbiased financial advisor.

To ensure your financial advisor is well qualified in personal finances and unbiased in his advice, consider the following five criteria:

Credentials: Having a renowned credential in financial planning, such as Certified Financial Planner (CFP) or Personal Financial Specialist (PFS), confirms that the advisor has acquired the education and experience in some or all major areas of personal finance, including taxes, investments, insurance, retirement, and estate planning. CFP and PFS credentials are awarded only to those individuals who have met the rigorous requirements of education and experience in planning for personal finances, as well as have passed the certification examinations and agreed to abide by the financial planning practice standards and continuing education requirements.
Subject Matter Expertise: Most financial advisors are planning professionals, not necessarily subject matter experts, in personal finances. For example, a financial advisor is skilled in planning for your taxes; but unlike a Certified Public Account (CPA) or an IRS Enrolled Agent (EA), he is not a subject matter expert in taxes. Similarly, a financial advisor is skilled in planning for your investments; but unlike a Chartered Financial Analyst (CFA), he is not a subject matter expert in investments. Work with a financial advisor who is also a subject matter expert in those areas of personal finance that are important for achieving your financial goals.
Client Specialization: Not all financial advisors serve all types of clients. Most financial advisors specialize in serving only certain types of clients with specific profiles. For example, a personal financial advisor may build his expertise and customize his services to serve only those individuals and families, who are in certain professions and life stage, with specific financial goals and net worth. You should ask whether the advisor is specialized in serving only certain types of clients with specific profiles in order to determine whether he is the right fit for your situation and financial goals.
Fee structure: A financial advisor’s fee structure largely determines whose best interests he serves – his client’s or his own. A fee-only financial advisor charges only fees for his advice, whereas a fee-based financial advisor not only charges fees, but also earns commissions, referral fees, and other financial incentives on the products and solutions he recommends for you. Work with a financial advisor whose fee structure is conflict-free and aligned with your best interests.
Availability: Your financial advisor should be regularly available, attentive, and accessible to you. Ask the advisor how many clients he currently serves and the maximum number of clients he is planning to serve regularly in the future. This clients-to-advisor ratio is one of the key factors in assessing your advisor’s availability to you in the future. Also, you should ask which planning activities are typically performed by the advisor and which ones are delegated to his junior staff members. Lastly, you should make sure that the advisor is accessible via phone and email during normal business hours.
Once you have shortlisted a few competent and impartial financial advisors in your local area, consult the ones who offer a FREE initial consultation first. During the initial consultation, assess the advisor’s availability and any other professional attributes you are seeking in your financial advisor.

Having a well-qualified and unbiased financial advisor by your side is extremely important in your journey toward your financial goals. When searching for a financial advisor, consider the advisor’s professional credentials, client specialization, subject matter expertise, fee structure, and availability to select the right financial advisor for your needs.