Five Things To Look For In A Financial Advisor

If you’re ready to work with a pro, here’s some criteria to keep in mind

NOTE: This post is intentionally not titled something like “THE top five things….” because while I believe these are good principles to follow when shopping for an FA, I’m not an investing professional, and I don’t know your individual situations, so I won’t pretend to claim that this list is definitive. Please make sure you always do your own independent research when choosing an FA to work with.

I’ve been a client with my current financial advisor for over ten years now. At the time that I was looking for financial advice, I was single, debt free, and had just returned from my first deployment, so I was sitting on a sizable chunk of cash. I knew the Dave Ramsey guidance about investing in TSP, and I had been following that guidance since coming on Active Duty (barring the first year when I did Lifecycle funds…you can read more about that here) but I knew that my deployment money was going to burn a proverbial hole in my pocket, and probably get spent on pointless stuff, if I didn’t tie it up in some sort of investments ASAP, so I sought out a local CFA and arranged to meet with him and talk about my options.

Ten years later, and I’m still with him, because the quality of work that he’s done on my behalf, in the intervening decade, has helped me not only grow my initial investment with him more than 10x, but it’s also enabled me to apply the knowledge that he’s given me to other areas of my portfolio as well, including TSP. Which, conveniently, is the first of my top five things to look for in an FA:

Find Somebody With The Heart Of A Teacher

The first thing you should look for in an FA is somebody who is willing to teach you investing principles and who will actually answer your questions and provide you knowledge. Now, that doesn’t mean you need to sit down with them and have them give you a crash course in financial advising, particularly if you’re not interested in learning anything about it yourself, but it speaks to their attitude and their willingness to act in your best interest. Even if you choose to never learn anything about finance, you should still seek out an FA who is willing to teach. You never know, you might change your mind down the road, and you should never trust someone who says “just let me handle your money and you’ll never have to think about it again.” That mentality will get you in trouble fast!

Find a Fiduciary Advisor

Investopedia has a great definition of the ins and outs of what it means to be a Fiduciary. It’s a term that goes back many hundreds of years, but is probably most well-known in the last five years because of the short-lived (and still under review) Department of Labor Fiduciary Rule. The short version of what it means to find someone who is a Fiduciary is simply to find a person or organization that is legally and ethically bound to act in your best financial interest.

And while that might not seem like much, even a quick glance at the news from the world of finance in the last 30 years will quickly reveal how many advisors, investment professionals and banks refused to act in their clients’ best financial interest, and those clients bore the damage that followed.

Find an Advisor Who Is Upfront About Cost

A lot of folks will say you should only hire a fee-only advisor, but I disagree. You should definitely not hire an advisor who works off commission, and you should only hire an advisor who will be upfront and honest about how much they cost, but my personal FA charges on a fee-basis, which I’m ok with. I look at it this way: If my advisor is making me more money, I think it’s ok for him to make more money, too. So if he’s charging me a percentage of my portfolio, then as my money grows, his money grows. So long as I know what that percentage is, and it doesn’t change without my consent (that would be a big problem!) then I would even go so far as to say that a percentage-based advisor is more incentivized to make your money work harder for you, because then its working harder for him or her, too.

Find an Advisor Who’s Always Learning

Ten years ago, I was one of the first AD military clients that my advisor had worked with. What made the difference for me was not that he was already knowledgeable about some of the unique things that go into a military career, it was that he was just as willing to learn from me as I was to learn from him! He was respectful and listened, but never presumed that he had all the answers. Rather, he took me on as a client, and then went out and got smart, on his own, about military life and some of the financial challenges that are inherent in it. Regardless of whether you’re in a unique financial situation or not, it’s always a good idea to look for an FA who is reading, attending industry conferences, has mentors, and is growing as a person and as an FA. Don’t sign up with somebody whose last learning experience came during the 2008 crash, and they’ve changed nothing since then.

Find An Advisor Who’s Not Afraid to Argue With You

I fancy myself fairly well educated when it comes to investing and personal finance. But I can’t tell you how valuable it has been to me to have an FA who’s willing to say “I don’t think that’s a good idea, and here’s why.” He has restrained some of my gambler’s impulses on “The Next Big Thing™” and has helped me to exercise patience and consistency in my investing. He’s been the one to say “Hey, how about we really focus on maxing contributions to X this year?” or “Why don’t we wait a year or two before making that big change to your portfolio and see what that particular stock, or fund you want to buy does?” usually, after that year or two, the thing that I was all excited about has fizzled to nothing and the rock-solid, but not flashy things he recommends have continued to produce steady returns.

Like I said at the beginning of this post, these five things may not reflect where you’re at in life, or in your personal investing journey, but I’m willing to bet that at least a couple of them resonate with you. Don’t be afraid to seek help, and to seek the advice of an expert, but make sure that they and their advice align with your vision for yourself and your financial future. Finding a good FA should be a lot like finding a fitness coach, or business mentor; they should be wiser, more experienced, and ultimately, more concerned with YOUR success than their own.

Writing about life, leadership, money and business. Weekly investing newsletter: teammwb.substack.com

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