How to Select the Best Financial Advisor

Investors can delegate investment work to financial professionals, but they are solely responsible for the professionals they select to do the work.

The quality of a planner or advisor is a major source of risk. That's because they are in a position to influence or control  you financial decisions.

Why do advisors have so much power? They have convinced investors they are financial experts. People rarely question the advice of experts. This makes advisors a major source of financial risk, if they are not as knowledgeable as they say they are.

Following are tips that will reduce your risk of selecting the advisor with the best sales pitch and increase your odds of selecting the advisor with the best qualifications.

You Need a Process

You need a process that gathers factual information from multiple advisors and compares their responses side-by-side. It is easier to compare advisors when you gather the same information. The following Paladin tools make this process easy.

  • Our "Request for Information" gather the facts for you
  • Our "Scorecard" tool compares advisor responses side-by-side 

The Role of Objectivity

You must minimize the impact of advisor sales skills when you select a new advisor. Advisors are adept at telling you what you want to hear. Your selection decision should be based on objective criteria that impact advisor competence and trustworthiness. 

Advisor Registrations

Real advisors are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs). Do not select an advisor who does not hold one of these registrations that permit them to provide financial advice and services for fees.

Fiduciary Status

By law, RIAs and IARs are fiduciaries (a person who holds a position of trust). These firms and professionals are held to the highest ethical standards in the financial service industry.

Track Records

Financial advisors do not have track records. You will have to rely on other information to measure their competence. For example: Education, experience, and certifications. Watch out for fake track records!

  • Be sure to use Paladin's "Check a Credential" service to make sure advisors have high quality certifications. Our research shows 38% of credentials are worthless. Advisors buy them to look more knowledgeable than they really are.

Ethics

Never select an advisor without checking FINRA's Brokercheck service. Review complaints and pay particular attention to complaints that required restitution by the advisor.

References

In general, references are worthless. No advisor will provide a bad reference. For all you know the reference is a friend of the advisor or a family member. A high percentage of references are coached to make the right comments.

Documentation

Verbal information from advisors is called sales pitches. Low quality advisors prefer verbal information so you have no written record of what was said to gain control of your assets. Documentation increases the accuracy of advisor information and you have a record in case there is a future dispute.

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