How to Choose a Financial Advisor

Start with public verification, not marketing

Before evaluating anyone's approach or personality, verify who they actually are on the public record. Investment advisers and their firms must file Form ADV with the SEC or state regulators, which discloses services, fees, conflicts of interest and disciplinary history. Brokers and broker-dealers are searchable through FINRA's BrokerCheck, which shows licenses, employment history and any regulatory actions or customer complaints.

This step is free, takes only a few minutes, and applies regardless of how the person was referred to you. A polished website or a personal referral is not a substitute for checking the public record.

Understand what kind of professional you're talking to

The financial services industry includes several distinct types of professionals with different legal obligations: registered investment advisers, broker-dealer representatives, insurance agents, and various combinations of these. The specific registrations a person holds determine what standard of care applies to their recommendations and how they are permitted to be compensated.

This distinction matters enough that it's worth its own explanation — see our related guide on fiduciary duty versus other standards for a fuller breakdown of registered investment advisers, broker-dealers and Regulation Best Interest.

Ask directly what standard of care applies

Rather than assuming, ask the person directly: are you acting as a fiduciary for this relationship, and is that in writing? Some professionals act as fiduciaries in some contexts (such as ongoing investment advice) and under a different standard in others (such as recommending an insurance product). It's reasonable to ask for clarity in plain language and to request it in writing.

Form CRS (Customer or Client Relationship Summary), which both investment advisers and broker-dealers are required to provide, is designed specifically to explain services, fees, conflicts of interest and standard of care in a short, comparable format. Ask for it if it isn't offered upfront.

Understand exactly how the person is paid

How an advisor is compensated shapes the incentives in the relationship, whether or not it changes the quality of advice in any given case. Ask directly whether the person is paid through fees you pay them (a percentage of assets, a flat fee, an hourly rate, or a retainer), commissions from products they sell, or some combination of both.

It is entirely appropriate to ask for a full, itemized explanation of every way the person or their firm could be compensated in connection with your account, including compensation from third parties. Our related guide on fee structures walks through the common models in more detail.

Clarify exactly what services are included

"Financial advisor" can mean investment management only, comprehensive financial planning, tax preparation, estate planning coordination, insurance recommendations, or some combination. Ask for a written description of the specific services included in the relationship, how often you'll meet or receive reviews, and what is explicitly excluded.

Also ask what happens if your situation changes significantly — a job change, a move, a health event — and whether the ongoing fee already covers adjusting the plan or whether that triggers an additional cost.

Compare more than one option

It is reasonable, and common, to interview more than one advisor before choosing. Comparing at least two or three lets you see the range of fee structures, communication styles and services available, and it gives you a baseline for judging whether a fee or an answer to a question seems reasonable.

Pay attention not just to what each person says, but to how directly they answer questions about compensation, conflicts of interest and disciplinary history. A willingness to answer clearly and provide documentation in writing is itself useful information.

Signs that warrant more caution

• Reluctance to explain compensation clearly or provide it in writing.
• Pressure to make a decision quickly, especially involving moving or liquidating existing accounts.
• Guarantees of specific investment returns — no legitimate advisor can guarantee market performance.
• An unwillingness to discuss their Form ADV, Form CRS or BrokerCheck record, or discrepancies between what they say and what those records show.
• Recommendations that seem to move automatically toward a single company's proprietary products regardless of your situation.