How to Select a Trusted Advisor

How to Select a Trusted Advisor

A recent 2008 survey by T.D. Waterhouse revealed that 92% of investors are concerned about their financial security due to the deteriorating economic environment and downward spiraling investment markets. During this time, some investors may have benefitted from guidance provided by a financial advisor and thereby reduced the amount of decreases in their portfolio’s value and perhaps were protected from selling certain holdings at the worst possible time.


For many investors, however, even though they might have been working with an advisor, the capabilities and competence of the advisor have recently been called into question. Moreover, discouraging headlines continue to unfold almost weekly where prominent, trusted advisors have been accused of fraud and neglect, compounding investors’ fears even further. The result is that an astounding 81% of affluent investors anticipate leaving their financial advisor, according to another survey recently released by Russ Alan Prince.


So what should investors do to make certain they are working with a financial advisor who is worthwhile? It can be a challenge to make a good choice but here are some guidelines to follow. First, seek out an independent advisor who is able to selectively choose investment options that are not tied to offerings only available through certain brokerage firms, banks, or insurance companies. Second, consider an advisor that charges a fee for the services being provided, rather than earning commissions from selling investment products. These advisors are called “fee-only”. Ideally, this fee arrangement helps to avoid a potential conflict of interest by ensuring that the recommendation is not self-serving and is instead in the client’s best interest. However, this is not meant to imply that advisors who do not meet either of these criteria are not to be trusted or not competent, but rather that the criteria should be taken into consideration as part of your due diligence process.


Fortunately, if you are in interested in finding an independent, fee-only advisor there are likely to be several in your area and can easily be found if you know how to search for one. One of the best ways is to use an online service, available at no cost, through an independent third party known as the Paladin Registry. The Registry has completed a due diligence on each of the advisors and has evaluated them based on certain critical criteria such as the following:

  • Credentials: Education, certifications, experience
  • Ethics: Compliance record, registrations, fiduciary status
  • Business Practices: Methods of compensation and servicing policies
  • Wealth Management Services: Sophisticated services for complex markets 

By accessing the Registry at and entering your requirements, you will be provided only with those advisors in your local area who have been awarded the Registry’s five star rating.

Another source for finding a credible advisor is through the National Association of Personal Financial Advisors (NAPFA). This organization has been in the business of promoting client-centered comprehensive financial planning for over 25 years. This Association, too, evaluates advisors based on strict criteria and only those meeting the highest standards for proficiency in the industry are allowed to join. In fact, at this point, only 2,000 advisors nationwide have been invited and a zip code based search can be completed at their site at


Finally, to continue your due diligence, you should occasionally check on your advisor to ensure that they have not had any complaints or lawsuits brought against them. You can easily check for this at the SEC website at and at


While no approach is fool proof, following the steps above should help bring the peace of mind that you have completed a process of due diligence that most investors have never undertaken.


By David Wilder, CFP®, CTFA, MST


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