How to Choose a Trustworthy Financial Advisor

When it comes to managing your finances, it can be beneficial to have a trusted financial advisor by your side. However, with so many financial advisors available, and an abundance of seemingly contradictory information available online, it can be challenging to know who to trust. So what kinds of things are important to consider when selecting a financial advisor, and how can you know who to trust? Here are a few tips to get started.

Qualifications and Credentials

A good first step in choosing a trustworthy financial advisor is to verify their qualifications and credentials. Financial advisors typically hold the FINRA Series 65 license, allowing them to provide investment advice on behalf of the firms they work for. It's also a good idea to look for advisors who have professional certifications, such as CERTIFIED FINANCIAL PLANNER™ (CFP®) or less commonly, Chartered Financial Analyst (CFA). These certifications demonstrate that the advisor has completed rigorous training and is committed to maintaining high ethical and professional standards. Not only that, the advisor is committed to ongoing learning to maintain their credentials.

Transparency and Disclosure

You should look for an advisor who is transparent about their fees, services, and potential conflicts of interest. Advisors who disclose all fees upfront and explain how they are compensated are more likely to be trustworthy than those who are not transparent. Additionally, advisors who are open about any potential conflicts of interest, such as receiving commissions for recommending certain products, are more likely to act in their clients' best interests. There are many financial professionals who will offer a retirement analysis at no out-of-pocket cost – just remember these professionals are more likely than those who are not insurance licensed, and depend on commissions for compensation. You may receive quality advice from them all the same, just be aware that there really is no such thing as free.

Reputation and Reviews

You can also check with regulatory bodies to see if any disciplinary action has been taken against the advisor. Check out your financial advisor and their firm on FINRA’s broker check, or on the SEC’s Investment Advisor Public Disclosure. Checking an advisor's reputation through reviews can be an excellent way to determine their trustworthiness, although this can be challenging since financial advisors are limited on reviews they are allowed to post publicly due to securities laws. You can always ask an advisor you’re considering using for recommendations from their existing clients as well. The advisor will need to confirm their clients are comfortable speaking with you before they can provide their contact information for confidentiality purposes, and other clients may be unwilling or unable to do so.

Experience and Expertise

Experience and expertise are also crucial when it comes to choosing a financial advisor. You should look for an advisor who has a track record of success in the planning areas that are important to you. such as retirement planning, tax planning, investment management, or insurance planning.

Personal Fit

It’s essential to choose a financial advisor with whom you feel comfortable and have a good personal fit. You should look for an advisor who takes the time to understand your unique financial situation and goals, and who is willing to work with you to develop a customized plan that meets your needs. Additionally, you should feel comfortable asking questions and discussing any concerns with your advisor. Honesty and transparency are the best policies when it comes to getting the most out of your relationship with your advisor. If you’re holding back because you’re afraid of being judged, you’re only hurting yourself. Try opening up and seeing how your advisor responds. If you still feel judged, you may need to move on: a good financial advisor should provide you with unconditional positive regard. (Note, that doesn’t mean they’ll always agree with you – nor should they.)

Choosing a trustworthy financial advisor should include careful consideration of their qualifications, transparency, reputation, experience, and personal fit. By taking the time to research and compare different advisors, you can find one who is committed to acting in your best interests and helping you achieve your financial goals.