Recently, I spoke at an event about “how to be good with money.” It was a fun conversation and the audience was really engaged and eager to learn.
After the event, one attendee approached me to ask a question. She wanted to know how to do her own investment advisor search, because she couldn’t find the right person.
“I know I need a financial advisor,” she said. She explained she reecntly inherited a sum of money from a relative and wanted to make the absolute best decisions possible with that windfall.
She wanted professional advice — but so far, the advisors she reached out to either (A) wouldn’t even give her the time of day because they deemed she didn’t have “enough” money to invest, or (B) told her they’d give her financial planning for free if she invested all her money with them.
That didn’t sit well with her, and she wondered if there was a better way. “Is there anyone who will just give me the advice I need?” she asked me.
The good news was that I had an affirmative answer: Yes, there are countless financial planners out there who offer comprehensive, holistic financial planning who help people make better choices with their money.
The bad news? It can be really hard to tell who actually will give you financial advice in your best interest, and separate those professionals from the crowd of others who may call themselves financial planners, financial advisors, wealth managers, investment advisors, and so on.
If you need to start your own investment advisor search, you have to know what you’re really looking for — because not all financial advisors are created equal.
In fact, not everyone who calls themselves a “financial advisor” is even qualified to give you financial advice. That’s the first of 7 important things you have to know before you seek out a financial professional to help you.
1. Know That Terms Like Financial Planner, Wealth Manager, and Investment Advisor Are Just Titles
A little-known fact about job titles like financial planner or financial advisor? They don’t actually mean anything.
They don’t signify any kind of training, certification, experience, or even job responsibilities. In fact, the SEC defines terms like these not just as job titles, but as marketing terms.
These titles aren’t regulated in any way. You could decide to call yourself a wealth manager tomorrow, open up shop, and give your friends your best budgeting advice and you wouldn’t be breaking any legal or ethical obligations to anyone who took advice from you.
Keep that in mind the next time someone from New York Life or Edward Jones tells you they’re a “financial planner.” They’re actively marketing to you, trying to sell you on the idea that you’ll receive some financial planning or advice from them.
But in reality, these and other representatives like them are salespeople. Their goal is to sell you products (like insurance or investment funds), not to provide you with comprehensive financial advice.
And the problem with that is these salespeople are not legally or ethically bound to work in your best interest (but more on that in a moment).
This doesn’t mean that everyone who calls themselves an “investment advisor” or “financial planner” is out to get you; that’s far from the truth.
What it does mean is that these titles simply don’t tell you much about what a particular professional actually does for clients (and if they’re qualified to do that job).
That’s why I’m intentionally using these titles interchangeably in the post — because they are interchangeable.
They don’t have set job descriptions, definitions, roles, and responsibilities. It all comes down to the individual professional.
To determine what kind of help a financial professional can offer you, you need to dig deeper. But if you can’t go by the title on someone’s business card, what can you look for to vet someone for quality, professionalism, experience, and qualifications?
2. Look for a CFP®, or CERTIFIED FINANCIAL PLANNER™ Professional
CFP® stands for CERTIFIED FINANCIAL PLANNER™, and it indicates a very high standard of excellence within the financial advice world.
(And yes, according to the CFP Board, the governing body of the designation, you really should write out the term with the little registered trademark symbols and in all caps if you don’t use the acronym.)
To give you a sense of what it takes to earn the CFP®, here’s a little excerpt from the CFP Board’s website on the certification requirements:
CFP® professionals must pass the comprehensive CFP® Certification Examination, pass CFP Board’s Fitness Standards for Candidates and Professionals Eligible for Reinstatement, agree to abide by CFP Board’s Code of Ethics and Professional Responsibility and Rules of Conduct which put clients’ interests first and comply with the Financial Planning Practice Standards which spell out what clients should be able to reasonably expect from the financial planning engagement.
Before you can sit for the board exam, you must have a bachelor’s degree and complete additional study for 8 key areas of financial planning:
- Professional Conduct and Regulation
- General Principles of Financial Planning
- Education Planning
- Risk Management and Insurance Planning
- Investment Planning
- Tax Planning
- Retirement Savings and Income Planning
- Estate Planning
In other words, CFP®s have a very comprehensive understanding and education in all things financial planning.
But knowledge alone isn’t enough, as indicated by the Board’s other requirements to earn and hold the designation. CFP®s must also adhere to a code of ethics and complete a number of Continuing Education credits each year to maintain their certification.
Instead of studying someone’s job title when you start your investment advisor search, ask them if they have the CFP®. If they don’t, you may want to keep looking for a more qualified professional.
Then, ask them a follow-up question: Are you a fiduciary 100% of the time?
3. Find a Fiduciary (Who Works as a Fiduciary 100% of the Time)
In addition to holding the CFP® marks, a good investment advisor or financial planner will act as your fiduciary.
Being a fiduciary means working in a client’s best interest at all times, and putting the client’s interest ahead of all others.
It’s hard to believe, but this is not a standard all financial professionals have to uphold.
Some can operate under the “suitability standard.” This means they only have to give advice that’s suitable for you — but it doesn’t have to be the best advice, or in your best interests.
When vetting a financial planner or advisor, ask if they’ll work as your fiduciary 100% of the time. Then ask if they’ll put that commitment in writing to you.
This legally and ethically binds an advisor to working in your best interest and putting those interests ahead of all others, including their own. It’s the best way to get truly objective financial advice for your situation.
For me and my financial planning firm, I’ve deliberately chosen to position myself this way because I value that objectivity. It allows my clients and I to have clear, direct, transparent, and authentic conversations and truly uncover the optimal path forward for them.
Those aren’t just empty words; you can see a copy of my signed fiduciary oath that I shared publicly through an organization I’m a member of, XY Planning Network.
Any investment advisor search you perform should include the fiduciary question. If they’re not and won’t sign an oath stating they will always work in your best interest no matter what kind of planning work or investment advice they’re giving, they’re not liable for putting your interests ahead of their company’s interests, or their own interests.
4. Understand How Financial Advisors Get Paid
The fiduciary conversation and the conversation about fees for financial advice or services go hand-in-hand.
Anyone who earns a commission is unlikely to be a fiduciary, because their pay depends on the products they sell you. They’re financially incentivized to provide you with what’s suitable, but not necessarily what’s best for you.
Commission-based and fee-based advisors both tend to work under the suitability standard and can sell you products that earn them commissions, kickbacks, or other financial incentives.
Much like some doctors receive kickbacks from drug companies for promoting certain pills, some advisors can get similar kickbacks from companies who offer mutual funds or insurance.
You may even find an investment advisor who tells you they’ll do your financial planning for free.
If something sounds too good to be true, it probably is — and this is no exception. There is no free lunch, and you may end up paying this kind of financial representative more through hidden fees and commission charges than you would if you simply paid another advisor’s financial planning fee.
What you want to look for is a fee-only financial advisor.
“Fee-only” means the only fees the advisor receives are paid directly by you, the client. In other words, these advisors cannot earn commissions or accept any kind of fees from third-parties. This allows fee-only advisors to be as objective and transparent as possible.
5. Avoid Advisors Who Brag About Returns
Let’s just set the record straight here: no one can control market returns.
On a similar note, no one can predict what will happen tomorrow. If they tell you what the market will do next, they’re merely forecasting or speculating.
We can reasonably assume the market will rise and it will fall. How much that movement will be, or precisely when it will happen, is not something that any advisor knows with certainty.
So if you come across an advisor who’s bragging about their ability to beat the market, get outsized returns, or otherwise guarantees you a certain level of success in investing… run, don’t walk, and find someone who uses an evidence-based strategic investment approach that actually focuses on the factors we can control.
Here’s what your investment advisor should be focused on and talking to you about:
- Reducing expenses
- Diversifying portfolios
- Minimizing taxes
- Staying disciplined
This is the stuff that really matters, and this is where the focus should be when it comes to your investments.
6. Work with Someone Who Actually Gets It
So far, the items on this list are pretty objective measures you can use on your investment advisor search. To recap, you’ll want to make sure any advisor you might potentially work with:
- Is a CFP®
- Works with you as a fiduciary, 100% of the time
- Charges for their services on a fee-only basis
- Understands what they can — and can’t — control when it comes to investment performance
There are still other important things to keep in mind as you look for a qualified professional to help you make smarter financial decisions. But from here, things get a bit more subjective.
The best choice of advisor for you also depends on how you feel about that person.
You should like the person you work with. They should truly listen to you, respect your goals, and work with you to help you improve your financial life.
Have you ever talked with a financial advisor and felt they judged you for what you said was important to you? Or did they try to convince you that you needed different goals?
Did you share something with an advisor who acted like they they completely understand what you said, but from their response, you know they had no clue what you were talking about… like you were on two completely separate pages?
I’ve been there myself and experienced these conversations. (In fact, it was older advisors who told me my business would fail right out of the gate. It’s been over 6 years now, and Beyond Your Hammock is running stronger than ever.)
The way I personally work and interact with clients is vastly different than the majority of planners in the industry because of the perspective I have through working with my peers.
There are plenty of quality CFP®s out there who do fee-only work, but very few who only focus on helping clients in their 30s and 40s. There are very few who deeply understand the opportunities, challenges, needs, and goals you have.
7. Know Where to Look to Begin Your Investment Advisor Search
It’s easier than it has ever been to find a qualified financial planner who provides comprehensive financial advice.
There are several professional organizations and associations of fee-only CFP®s who do not sell products, make commissions, or require you invest a certain level of assets with them before they’ll talk to you.
You can start your search at one of the following locations:
This will give you access to thousands of qualified advisors — although that may introduce new questions about how to narrow the search.
XY Planning Network’s Find an Advisor portal allows you to search for someone’s specialty, meaning you can find an advisor who specializes in working with teachers, for example, or members of the military.
And if you only have a few quick questions, try Garrett Planning Network instead. That organization will connect you with an advisor who does hourly work (instead of full, comprehensive financial planning).
If you’re a 30-40-something professional who is driven and motivated to succeed with an increasingly complex financial situation and you want help making the best financial choices for you, I’d be crazy not to recommend checking out Beyond Your Hammock.
I built my firm for people like you, and specialize in serving clients in your specific situation. You’re more than welcome to schedule a call with me here.
We’ll take 30 minutes to chat about your situation and see if working together might make sense.