How to Choose an Investment Advisor

John P.

CashHiring someone to help manage your investments is every bit as difficult and as critical as hiring employees at work. You will not get it right 100% of the time, and it will cost you money as a result.

Having said all that, I’ve put together a guide based upon my cumulative experience in this area. Stick to it and you should be able to gather a lot of good information for comparing advisors prior to your selection.

Just like hiring employees, the keys to selecting a financial advisor are to ask the right questions, and to have more than one candidate (I think three is a bare minimum).

To start with, here are a few recommendations:

  • Integrity is the single most important factor in choosing and investment advisor. You must be able to trust this person’s integrity as much as your doctor’s, because both individuals have your future in their hands.
  • You should be brutally honest about your complete financial situation and goals.
  • When you are unsure about something, you must question it until you understand it fully. Simply “trusting” your advisor is doing them a disservice since if you are unhappy later because you didn’t understand, it hurts everyone.
  • A good advisor wants to teach you. They want you both to be on the same page and to share a common understanding. This is how they add value, and it’s their job.
  • Depending on your level of wealth, rates are highly negotiable.
  • Advisors should always, always, always disclose their fees and commissions to you. There is nothing wrong with them getting paid, this is how they feed their family, but you should question if there are lower cost / commission options available for every decision you make. If the higher commission option is really most appropriate to your situation your advisor should be able to convincingly spell out why.
  • Finally, if you ever feel funny about something, or begin to even slightly doubt your advisor’s integrity, go through the entire process of finding another. Your first duty is to protect your family and assets, and diligence is the price you pay.

Below is a general format for information to provide to a prospective advisor. This should answer many of their questions in advance and help them prepare the best proposal to earn your business.

We have X adults in the household and X children.
All financial planning, reporting and Web interfaces must be integrated to show the totals combined (with a single login for the Web).

Income Sources:
Jane will earn at least $XXk annually.
Dick will earn at least $XXk annually.

We currently have the following loans / debt:

  • Home Mortgage – $XXX,XXX
  • Vehicle 1 – $XX,XXX
  • Vehicle 2 – $XX,XXX
  • Credit Card – $X,XXX

We spend around $X,000 monthly.
We wish to save / invest the excess.


  • $XXXXX in investment assets
  • $XXk in home equity


Our primary interest is in working with a true Financial Advisor. We expect our advisor to promise to find the lowest-cost funds and best of breed investments, and to give us the best holistic financial advice:

  • We want an advisory account, not a brokerage account.
  • We expect acknowledgement of a fiduciary responsibility to act in our best interests.
  • We expect disclosure of all conflicts of interest.
  • Advisory team members need to have excellent resumes with appropriate educations.

We want to have quarterly holdings reviews with our financial advisor. These reviews should include the following at a minimum:

  • Compare starting and ending balances for the quarter.
  • Present growth statistics in both dollars and percentages, with comparisons to benchmarks.
  • Disclose all fees. We want to have constant visibility of the fees we are paying.
  • Analysis regarding how the investments are positioned, where we need to rebalance, how our level of risk is looking, etc.
  • Technical justifications for any item in our portfolio.

We want to see full financial planning models which provide long term projections of our wealth given a number of different variables:

  • This model should be updated annually at a minimum.
  • We prefer this model to be built into the Web interface so we can manipulate the numbers ourselves.

We are particularly interested in tax efficiency. We do not want to see lots of trading activity that causes us to have high returns with huge tax implications.
We are most interested in the bottom line, but all things equal we want to pay less tax.

We require responsiveness:

  • We don’t call often, but when we do we expect that calls will be answered. If we don’t reach our advisors by phone we expect same day return calls.
  • We expect cell phone numbers and/or blackberry addresses of our current advisors and bankers for emergencies.
  • We expect same day return e-mails.
  • We expect that service requests will be completed in a timely manner.

We do not want paper statements mailed. We want everything done online for security reasons. We take the threat of identity theft seriously, and sending documents through the mail to be left in our mailbox is inherently insecure.

We require timely and comprehensive tax reporting.


We desire a comprehensive, feature-rich, Web site which integrates all accounts:

  • Checking and savings
  • Credit cards
  • Lines of credit

We may require business accounts and lines of credit:

  • Business checking
  • Business credit cards
  • Line of credit

We are interested in attending occasional events coordinated by our managers which involve education or networking.

I would recommend starting with the large investment firms first before considering a local independant advisor because they have more resources and generally greater oversight. Firms to consider include:

If you happen to have investable assets greater than $1 million, you need to specifically look at the High Net Worth management groups. Do not talk to anyone else. These special groups only handle clients with over $1M and normally have no more than 200-300 clients. They also have many options not available to normal investment advisors.

Finally, here is what the SEC has to say about hiring Investment Advisors. It is important that you also review their information as there are items I haven’t covered.


  1. Don B. says

    I went with the suggestion of a family member about ten years ago and have been really happy. It’s important to go with an advisor that has a proven track record (so referrals from close friends and relatives can be key). The things that I appreciate about my advisor, Keith Steidle, is that he performs account reviews on a regular basis with myself and my wife, he asks about our concerns and explains things in terms that we can really understand.

  2. Loren Belser says

    I found this the most helpful and enlightening thing I’ve read on the Internet. We find ourselves searching for a new financial advisor after over 10 years. We are in the high net worth category. None of our friends of similar or even greater wealth are particularly happy with their advisors and thus, can offer no referrals. What a sad state of affairs that is! We don’t care if our advisor is local but we do care about performance. Are performance charts to be trusted? Required? After answering all the questions in the blog post, should we then start with performance metrics? Plus, we enjoy our top-flight banking relationship. Can the banking be separated from the advisor and still get the same gold-plated level of attention?

  3. says


    Both John & Paul make some excellent points. Johns information format is comprehensive and sets clear expectations from the start. With that being said, Paul nailed the truth about the industry, stay away from the big-box shops. The retail (individual) side of the financial service industry is ripe with conflicts of interest and driven by asset gathering. In full disclosure, I worked for large financial institution for almost 10 years before I went independent. As an independent company, we are not owned or financially supported by any bank, broker-dealer or insurance company. As a Registered Investment Advisor we are monitored and regulated by the State of Texas Securities Board. And as a proponent of genuine, unbiased investment advice, we are always willing to go the extra mile for the average investor.

    So glad to see these discussion occurring, thank all of you for your input as well as your questions. People should not be scared of the financial service industry, the industry should be scared of people.


  4. Smita Saxena says

    Hi John,

    I really like your post and I think it does a great job in covering the basics when it comes to choosing advisors. I’m just confused as to what someone like me, a recent university graduate, should do when choosing an investment advisor. I don’t want any acknowledgment of fiduciary responsibility or any of other special services that come along with having a fully managed account, but I was looking for someone to get me started. How does someone like me who is just starting off go about getting an advisor who can help with me basic things like asset allocation and paying off my college loans. Would you recommend sticking to the big advisor/brokers such as Schwab & Fidelity? My biggest worry about them is that their advisors aren’t really “advisors” but more sales-people, at least that’s the feeling that I’ve gotten when speaking to some of them.

    What are your thoughts on this?

  5. says

    I am not sure that I agree that the big firms have better resources. I worked at them for a long time and the playing field is pretty much level now.

  6. says


    You have written an excellent piece on Choosing an Investment Advisor! However, you may want to consider the firms recommended at the end. You recommended starting with the large investment houses. As you may know, there are no “pure” investment advisors working at Smith Barney or Merrill Lynch as all investment professionals with the large Broker Dealers are Brokers/Registered Representatives. Some may also be Investment Advisory Representatives of the Broker Dealer’s Registered Investment Advisory Arm, but there are no advisors at these firms who are not also brokers.

    This is not a semantic issue and I would recommend you to take a look at the following TD Ameritrade brochure on the differences between Registered Representatives (who represent and are legally obligated to their Broker Dealer) and Registered Investment Advisors (who have a fiduciary responsibility to put their clients interest first). Click to review the two page piece.

    There are good brokers at Merrill Lynch and Smith Barney, but they are commission compensated sales people who may choose their capacity and responsibility depending on the client and personal choice. I would not use the term “advisor” when referring to any broker, even if they use that title on their business cards. They do not normally, and rarely choose, to accept fiduciary responsibility for the products they sell or the recommendations that they make. The SEC link in your blog contains solid information on choosing an advisor, not a broker. Most of the information it contains does not apply to brokers!

    Everything else in your blog entry was outstanding and most investors would benefit from using it in their initial interviews with investment professionals. The differences between advisors and brokers is not understood by most investors simply because the industry allows terms like “advisor” or “consultant” to be used by commission sales people.

    Best regards,

    Paul Puckett, Principal, Beacon Wealth Advisors, LLC

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