What to Consider When Choosing a Financial Advisor

School of Financial Wellness

papers and a scale - choosing a financial advisor, like any financial decision, can be daunting

Join us for our next event: Rollover and Play Dead. Does Your Estate Plan Really Work? with speaker Lynn Campisi, J.D., LL.M.

The webinar will be held on April 20th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.


Some of the prospective clients I have met over the years don’t need to hire a financial advisor. Simply put, they do a good job and don’t let their emotions get in the way of making solid investment decisions. They also, whether intuitively or otherwise, have a great connection with what kind of risk they need to assume to get them the lifestyle they want.

Now comes the BUT.

We all age, and as we age, our perspectives and decision-making processes can be dramatically affected by a rapidly changing landscape. These are dangerous years when we often see issues develop with prospective clients — from forgetting to act on a specific investment change, to losing the intense interest it takes to maintain the vigilance they have demonstrated over most of their adult lives. These changes are generally centered around their own health or that of their families.

So the question you must ask, whether you have invested for yourself or have used a financial advisor, is how do you look under the hood of an advisory firm?

Let’s start with the easy stuff.

Investment advisors have references, too

Ask prospective advisors if you can speak with a few of their current clients. It’s best if they can provide references with similar circumstances to your own, such as age, location and lifestyle. Talk to these references and consider these conversations a very important part of your process. No investment advisor will give you bad references, but most people you speak with, if you engage them in a meaningful conversation, will share with you the good and the bad.

The “getting-to-know-you” step

If the advisor gets a pass, move on to the next step: Ask your financial advisor how he or she plans to get familiar enough with your circumstances — now and in the future — to begin advising you. What kind of fact-based process is this advisor prepared to put you through?

If any advisor starts talking about what you need to be invested in before they understand your total situation, get up, leave and don’t look back! You see, what you need now and what you are projected to need in the future determine if the risk profile an investment advisor recommends is realistic. Not enough risk, and you start to burn principle. Too much risk, and you will either be extremely happy because you got lucky or struggling at a time in your life that offers limited options. This part of the process is critical and grossly under-emphasized. This is where most of the time should be spent because figuring out what you will need for the rest of your life takes hard work.

You want a financial advisor with options

Finally, the investment recommendation is presented.

In your mind, this is where you wanted to start the process, but it has taken forever to get to this step. Remember, this is the easy part for advisors. This is their arena, and their prudent responsibility is to ensure that their world has enough options available to offer you the best possible recommendations for your situation.

How do you begin this overwhelming task?

Let’s start by asking a few important questions: What is this firm’s investment philosophy? In what investment products does this firm have expertise and experience? Stocks, both common and preferred, bonds and mutual funds make up virtually thousands of options that most independent financial advisors have available for use. Here are some examples:

  • Domestic Mutual Funds – 27,147
  • Domestic ETFs – 2,200
  • Global Stocks – 113,273
  • Global ETF’s – 16,759
  • Global Preferred Stocks – 2,137
  • S. Stocks – 20,193

Warning: If an advisor has limitations in his or her offering, that can have a negative impact on your situation. We often see a potential client fall in love with one particular mutual fund company, like Vanguard. Vanguard is a great mutual fund company, but they only have 200 or so funds under their umbrella. The domestic mutual fund markets have almost 30,000 funds to choose from. Your advisor should have most, if not all, of these options available for you.

Here is a simple situation to illustrate my point: Imagine that you are interviewing three financial advisors. Advisor A has the same presentation as B and C, but only uses annuities to solve the client’s need. Advisor B uses just two families of mutual funds, and Advisor C uses all options. Each advisor charges the same fee. Which is the better deal?

The more options you have, the better the expected result. You might assume that the advisor with the most options would charge more because it is more work to do the research. However, it’s just the opposite: More options result in fewer fees, and vice versa. Investing in the annuity with Advisor A is clearly the most expensive, with the most limited investment platform. This is a very generalized example but something we consistently see from prospective clients.

In short, analyze your advisor before you commit

Today, financial advisory services and financial planning are merging into a single, holistic relationship with clients. Advisors must understand every aspect of their clients and have many low-cost options available to solve their specific needs. The analysis done at the beginning of the relationship must be repeated at least annually, ensuring a risk profile that represents the client’s personal situation as it evolves.

I will conclude with one last point: your advisory firm should be an avid supporter of the College for Financial Planning. This can be evidenced by having one or more CERTIFIED FINANCIAL PLANNER™ professionals on staff. The CFP® designation is awarded to individuals who successfully complete the CFP® Board’s initial and ongoing certification requirements. CERTIFIED FINANCIAL PLANNER™ professionals must take extensive exams in the areas of financial planning, taxes, insurance, estate planning and retirement.

Join Us for a Meld University Event

Meld Financial - Shred It - Event benefiting Children's Hospital of Alabama
Shred-It to benefit Children’s Hospital of Alabama

Bring your sensitive documents to be securely destroyed by Shred-It on site! Sponsored by Meld Financial for the benefit of Children’s of Alabama.

Preparing For Long Term Care Expenses in Retirement
Preparing for Long-Term Care Expenses in Retirement

Long-term care expenses represent a significant threat to your retirement outlook and can deplete a retirement nest egg quickly.

Financial Fingerprint™ by Meld Financial. Secure YOUR retirement plan.
Financial Fingerprint: How to Approach Your Retirement Questions

We are excited to introduce Financial Fingerprint™, our unique, retirement-focused planning process. Join us for this no-cost webinar to learn more!

Trending Articles

Security Filing Strategies
What is Your Social Security Full Retirement Age and Why It Matters?

School of Social Security & Medicare

The Social Security defines Full Retirement Age (FRA) as the age at which you are entitled to receive your full Social Security benefits known as Primary Insurance Amount (PIA).

Wealth managers are key to your investment strategy.
5 Characteristics of a Quality Wealth Manager

School of Financial Wellness

Looking for a quality wealth manager? We pulled together our list of the 5 most important qualities to consider during your search.

Social security medicare retirement text art word jumble
Special Social Security Filing Strategies

School of Social Security & Medicare

If you were born before January 2, 1954 you may be able to have your cake and eat it too regarding Social Security. In this article, we explore this special strategy.

Why Meld Financial?

Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Chairman - Meld Financial

“We will always recommend the same course of action we would choose for ourselves, given the same circumstances.”

-Mark McGarvey, Chairman