Infographic: The 7 Things you Need to Know Before Choosing a Financial Advisor

Everyone knows that choosing a financial advisor is a big decision, but how do you find the right one? You can talk to your friends and family to see who they use. You might even ask your CPA or attorney for a referral.

Even then, how can you be confident that an advisor is qualified for the job and is committed to putting your interests firsts? To help you narrow down your choices and make an educated decision, I’ve created this infographic that illustrates the seven key things you need to know.

Click on the image below to see an expanded version of the infographic:

choosing a financial advisor

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Highlights: The 7 Things You Need to Know Before Choosing a Financial Advisor

Services Provided


Total returns lost on a $1 million portfolio over 20 years by a 1% fee. Many advisors charge 1%, while only managing your investments.

  • Investments
  • Estate and Gift Planning
  • Education Planning
  • Tax Planning
  • Insurance and Risk Management
  • Personal Finance
  • Retirement Planning & Social Security



Amount you’d pay in commissions if you invested $250,000 in a mutual fund with a 5.75% front-end load.

  • Commissions
  • Commissions & Fees
  • Fee-Only

Obligation to Clients


of investment advisor representatives are also affiliated with a broker-dealer (meaning they are allowed to charge both commissions and fees and are not required to act as a fiduciary at all times).

  • Fiduciary
  • Suitability

Software & Technology


A technology-focused advisor can bring your entire financial world together in one place and provide you real-time access. He or she may also use web meeting technology to collaborate with you anytime, anywhere.

  • Investment Performance Reporting
  • Financial Planning
  • Collaboration/Meeting
  • Security

Investment Philosophy & Strategy


of large cap core funds underperformed the S&P 500 benchmark over the five year period ending December 31, 2013

  • Attempt to Beat the Market
  • Seek to Earn Market or Asset Class Return

Education & Credentials


The Chartered Financial Analyst (CFA) designation is the gold standard of the investment management field.

  • CFP®
  • CFA
  • College Degree

Registration & Disciplinary


of the more than 629,000 broker-dealer representatives in the U.S. have between 1 to 5 disclosures on their record for complaints, violations, terminations, or judgments.

  • Verify Professional Credentials
  • FINRA BrokerCheck
  • SEC Investment Adviser Public Disclosure

Details: The 7 Things You Need to Know Before Choosing a Financial Advisor

What services and advice does the advisor provide?

  • Some advisors only manage your investment portfolio
  • Others provide comprehensive financial and retirement planning advice that goes well beyond investments
  • It’s important to know what services you are receiving when working with an advisor so you can make an apples-to-apples comparison

How is the advisor compensated?

  • Most advisors sell mutual funds, insurance, and annuities and earn commissions by doing so. This creates a clear conflict of interest.
  • Other advisors are compensated exclusively for the advice and services they provide, just like a CPA or attorney.
  • Such professionals are known as fee-only advisors because they do not earn commissions.
  • It’s important to note that “fee-based” is not the same as “fee-only.” Fee-based advisors actually earn commissions and charge fees.

What obligations does the advisor have to me?

  • Advisors that work for a large bank, brokerage firm, or insurance company have minimal obligations to their clients
  • Such advisors are free to recommend in-house products or investments that pay higher commissions, so long as they are deemed “suitable” for the investor
  • On the other hand, advisors that are employed by firms known as independent registered investment advisors (RIA) are required to always place their client’s interest first
  • This is known as a fiduciary standard of care and is similar to a doctor-patient relationship

What type of technology does the advisor use?

  • Some advisors run paper offices and primarily handle everything in person or via snail mail
  • Other advisors embrace technology, allowing them to deliver a similar experience to clients no matter where they live or work
  • Often, these advisors will employ technology that provides their clients with real-time financial information, advanced performance reporting, and the ability to collaborate using web meeting software

What is the advisor’s investment philosophy?

  • Some advisors employ strategies that attempt to beat the stock or bond market
  • Such advisors attempt to pick stocks, time the market, or choose fund managers who will outperform. Research shows that the odds of success with such a strategy are low.
  • Other advisors design portfolios that seek to earn the return of the market or asset class they are investing in
  • These portfolios are typically low cost, tax efficient, and widely diversified. Research demonstrates that this strategy provides clients with a high probability of outperforming most other investors.

What education, credentials, or professional designations does the advisor hold?

  • Financial advisors come from all backgrounds and often start their careers in other related professions, such as accounting/tax, law, or finance
  • In addition to career experience, the advisor should have, at a minimum, a bachelor’s degree from a respected university
  • It is also wise to seek out an advisor who has obtained advanced credentials in the fields of investing and financial planning. The most widely known are the CFP® and CFA designations.

Does the advisor have any complaints or disciplinary actions on their record?

  • Although the vast majority of advisors are law-abiding professionals, an alarming number of them have complaints, regulatory violations, or other issues they are required to report on their record
  • Before working with an advisor, you should always check their history with the relevant regulator
  • If they work for a broker-dealer, you can view their registration through FINRA BrokerCheck
  • For investment advisors, use the search function on the SEC Investment Adviser Public Disclosure (IAPD)
  • If an advisor holds themselves out as having a CFP®, CFA, or other professional designation, check to confirm they are in good-standing with the organization that confers the designation

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