How You Know He’s the One – How to Select A Financial Advisor

You worked hard for your money. You have big plans in retirement. Your family depends on you. Would you trust a guy to take care of all of that just because he’s a good golfer and his wife throws nice parties? Of course not. There’s a trick on how to select a financial advisor.

How Do You Make the Right Selection?

We know many investors prefer to keep the process simple by selecting the advisor they like the best or the one with the best sales pitch. But, that is an extremely risky way to select an advisor who will influence or control your financial decisions.

We wish there was a simple way to select an advisor but, to be candid, there is no easy way because Wall Street deliberately muddies the water so the decision is much tougher than it should be. For example, advisors do not have mandatory disclosure requirements, so it is up to you to obtain the information you need to make the right decision.

Your key to selecting the best advisor is an objective process. Then your decision is based on factual information that you know is true. Only high-quality advisors should make it through your process.

Best case, you will identify one advisor who stands out above all the rest or two advisors who are equally qualified and it doesn’t really matter which one you select.

If you have reduced dozens of choices down to two great candidates, you have done a great job identifying, researching and interviewing financial advisors.

In case you are not convinced, don’t make a hasty decision just to get the process over with. Mistakes can produce disastrous consequences:

  • It could be years before you know you made a mistake
  • You could pay thousands of dollars of excess fees
  • You could be exposed to unnecessary risk
  • Your assets may underperform relative benchmarks and indices
  • You may be forced to defer your retirement or reduce your standard of living during retirement

You want to increase the probability you select the best advisor for the right reasons. And you want to decrease your risk of selecting a low-quality advisor for the wrong reasons.

Let’s help you make a clear decision.

We can provide information and a process, but you have to make the selection decision.

Review the Facts

The foundation of your selection decision should be factual information that includes educational background, years of experience, quality certifications and clean compliance records.

You accumulated this factual information during the research phase. Any verbal information you received during the interview phase should be documented and verified to the best of your ability. For example, if the advisor says he holds a CFP designation, you should go to the CFP website and verify that this is true.

To be safe, you should discount verbal information that was not documented by an advisor. Too often, this information is part of a finely honed sales process.

Without question, the accuracy of advisor information increases when it is supported by documentation.

Add Some Intuition

If you have one superior candidate you should choose that advisor.

If you have two superior candidates, you can use your intuition to break the tie. Which one would you be most comfortable working with? You have done your homework so at this point a little subjectivity is OK as long as the professionals are both qualified to be your advisor.

A major risk is letting subjectivity creep into your decision-making simply because you like the advisor. You may even be inclined to forgo the research process because you like a particular advisor. This is a major source of risk if you select the advisor with the best personality or sales skills versus the advisor with the best qualifications.

The best advisor may not be the most personable advisor. There are a lot of numbers and analysis in the financial advice business, so the best advisors typically are intellectuals, quantitative and analytical. You might even classify them as nerds. You may not want to play a round of golf with them, but they are excellent financial advisors.


If you have trouble determining which professional you should select, answer the following questions to break the tie and make the right decision.

  • Which advisor had the best qualifications: Credentials, ethics, business practices?
  • Who do you think is the most trustworthy based on licensing, employment and compliance record?
  • Which advisor was the most transparent, providing factual information without being asked?
  • Which advisor had the best communication skills (verbal and written)?
  • Which advisor has the most experience working with clients who are similar to you?
  • Which advisor asked the best questions about your current situation?
  • Which advisor provided the best, most complete answers to your questions?
  • Which advisor seemed more inclined to educate you along the way so you can make increasingly informed decisions?
  • If you are married, which advisor recommended including your spouse in the interview?
  • Which advisor promised the best ongoing services (i.e., meetings, reports, reviews, calls, emails, etc.)

Your research and interviews should have uncovered the answers to these questions.

Advisor Service Agreement

There is one more step after you make your selection decision. You will have to sign the advisor’s service agreement and additional documents the advisor needs to move your assets to his broker/dealer or custodian.

In our experience, 75 percent of investors do not read these documents before they sign them. If they did, they might be surprised by contents that have two primary purposes – provide required disclosures and protect the firm that is providing the advice and services.

Why spend time reading the agreement? After all, you trusted the advisor enough to select him.

This is a major mistake.

The advisor’s agreement can include a series of conditions, disclosures, disclaimers, limitations and procedures that may make you very uncomfortable.

Advisors use sales tactics to get you to buy; they tell you what you want to hear. The agreement describes the real conditions of the relationship, but you won’t know that if you don’t read it.

When your money is at stake, you have to trust what you see and not what you hear.

Be extra cautious if the agreement is long, printed in small font or loaded with legal language. At some point you may even feel a need to have an attorney review the document or someone who is familiar with these types of service agreements.

Any open issues should be negotiated in advance and added as addendums to the document. You may find advisory firms do not like addendums that protect you.

Following are 5 types of content that you want documented in the agreement.

  • Who employs or licenses the advisor and who owns the firm? (There may be layers of ownership.)
  • Is the financial advisor acting in a fiduciary capacity when he provides financial advice and services? Is there written acknowledgement in the agreement?
  • Is the advisor’s fee schedule published in the agreement? Are the payments in advance or arrears? Is there a refund policy?
  • Which firm (custodian) has physical possession of your assets?
  • How do you terminate the agreement?

The service agreement is binding. Read it before you sign it.


Some financial advisors create high expectations as a way to convince investors to buy what they are selling. Commissioned sales representatives are prone to do this because they are paid at the time of sale and there are no financial consequences if they fail to meet the expectations they created.

Fee advisors are less prone to create high expectations because they can be terminated if they do not meet the expectations they created in the interviews. This is one more reason why you should select an advisor who is compensated with fees.

Watch out for high expectations that are sales ploys. You want realistic expectations that have a high probability of occurring.

Financial promises and guarantees are illegal. No one has a crystal ball that can predict the future. Any advisors who promise or guarantee particular results or outcomes should be automatically excluded from your selection process.

Once you agree on a realistic set of expectations, you should document them in writing. Down the road, it is going to be difficult to remember exactly what you were told to expect.

When it is time to remember what they told you, some advisors develop a condition that is known as selective amnesia – they only remember information that benefits them.


Advisors do not like accountability because it can cause you to terminate their services.

However, your agreement should include accountability so your advisor not only knows what is expected, but that he or she knows the consequences of failure to meet your expectations.

Expectations and accountability are spelled out in your agreement with the advisor. This may be an addendum to the advisor’s agreement.

Expectations and accountability are the foundation of your relationship with a financial advisor.

Jack Waymire worked in the financial services industry for 28 years before he left to found the Paladin Registry ( in 2004. This investor education website was based on the Principles in Jack’s first book: “Who’s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.” 
The Registry also has a free service that matches investors to advisors who meet Paladin’s minimum requirements for competence and trustworthiness.

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