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9 Lessons for Finding a Good Financial Advisor for You

9 Lessons for Finding a Good Financial Advisor for You

January 10, 2022
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A new year is here, and it’s a great time to do that retirement plan you’ve been wanting to do. A good financial plan starts with finding a financial professional and understanding the basics of what you can expect from a good financial professional. This blog is dedicated to helping you do just that. Let’s get started! 

Finding a Good Advisor and Understanding Cost 

Some people confuse having investments with having a retirement plan. But investments alone won’t give you the same clarity and confidence as an actual plan, and they certainly aren’t the starting point for people who are beginning their preparations for retirement.

Lesson #1 : If you are getting investment advice before your plan is built — RUN!

Finding a good advisor is critical to your planning and ultimate success, but to find a good advisor, you have to do your homework.  To help you make an informed decision when choosing an advisor, follow these five steps. 

  1. Conduct a FINRA/ Broker Check and check the advisor's state insurance licenses.
  2. Understand the advisor’s licenses and what they can do based on those credentials. 
  3. Learn the advisor’s value statement and understand the philosophy supporting their retirement planning practices.
  4. View one of their sample plans and define how the advisor will design, monitor and adjust your plan. 
  5. Make sure you understand what it costs to work with the financial advisor.

Sure, these guidelines for selecting a financial advisor might seem like a lot of work, but a successful financial plan or retirement plan is based on financial literacy. Unfortunately, most of us weren’t taught the literacy we need to make informed decisions when it comes to money. So slow down and commit to being a good student. 

School is in session, so let’s dive into that homework together! We’ll look at 8 Lessons that will help you put these 5 steps into practice.

Lesson #2: Vetting the Financial Professional

Step I: Look up your advisor(s) and find out about their licenses and backgrounds.

Go to This will give you all the basic information you need to start your research on the advisor or advisors you are interviewing. You’ll learn about the advisor’s investment licenses, their work history, complaints or judgements against them, and the states in which they are licensed to do business.

Step II: Understand what the various licenses mean and the work your advisor can and cannot do. Review the advisor’s credentials and use the following information to help you understand what you find out about them.

Series 7 Registration: The Series 7 is considered the gold standard of financial advisor registration. This registration is administered by FINRA and enables the advisor to sell almost any type of investment product, including stocks, bonds, options, and futures. Advisors with this registration are also authorized for  the sale of packaged securities. The only securities the Series 7 registration does not permit are commodities, which require a Series 3 registration, as well as separate real estate and life insurance licenses.

  1. Series 6 Registration:  The Series 6 registration enables financial professionals to sell packaged securities, such as mutual funds and variable annuities. A financial professional with only a Series 6 may not sell individual stocks or bonds.
  2. Series 63 Registration: Most states require a Series 63 registration for financial professionals to conduct business within their borders. This is an exam advisors must pass in addition to the Series 7 or Series 6.Series 66 or 65 Advisory Registration: States also require the Series 65 for financial professionals who are compensated with fees as opposed to commission. Like the Series 63, this exam is heavy on rules and regulations, as the rules differ greatly for advisors who do not get paid on commission. Notably, individuals who hold a professional designation like the CFA or CFP may be eligible to have their Series 65 requirement waived by FINRA.
  3. Life, Accident and Health License: This license allows the advisor to sell Health Insurance, Disability Insurance, Life Insurance and Long-Term Care Insurance. These insurance licenses are state licenses, and to do your homework thoroughly you should find out in what state(s) the advisor is licensed for Life, Accident and Health License. Then, you can also go to the insurance department for that state and verify their licenses. 

Lesson #3: Not all advisors are licensed to give advice, and the types of products they can sell depends on the licenses they hold.

Step III: Learn the advisor’s value statement and understand their philosophy of a good retirement plan.

The advisor you choose needs to be a good fit for you; you’ll want a relationship that makes you feel comfortable and a plan that gives you confidence for the road ahead. So, it’s important to do your homework before you even have a “get to know us” appointment with a potential advisor. A good place to start is a simple Google search to check out the advisor and their firm. Check out their website and read a little about them before you meet with them. See if you can find an explanation of their values and philosophy as a company, and consider whether or not you agree with what you read. Between your research and that initial meeting, you’re trying to determine the answer to the question, “Are we a good fit?”

Pro-Tip: You might want to write down a list of questions to ask the advisor in your initial meeting. 

For instance you might ask them, “What is your definition of a ‘good’ retirement plan?”  All advisors have certain procedures they like to follow to accomplish a given goal, so you should listen and ask yourself whether or not you like what you’re hearing and whether or not you actually understand what they are saying. You need to learn, and if the advisor is talking in terms that seem like a foreign language to you, this could be a sign you’re not a good fit. This will be a long-term relationship that will require trust and a common understanding of each other’s value of money, and you will need to be able to communicate easily with each other.

Here is an example of a retirement philosophy: At our firm we believe that a person’s base cost of living should come from guaranteed income sources. One year of your base cost of living should be tucked away in the bank. Lifestyle money is the only type of asset we like to see in the market unless you are a person with great wealth. The plan must be strong and still work if one of you should become disabled or die.

Knowing the philosophy your advisor embraces will give both of you a basis to either agree or disagree. Just because you disagree does not mean you can’t work together, but it gives you an opportunity to direct the advisor on your own philosophy. Communication is key; make sure you and the advisor are hearing and understanding each other.

Lesson #4: Don’t just “trust” the advisor, get to know them and feel confident on how they will be planning for your success.

Step IV: Look at a sample plan and understand how the advisor will design, monitor and adjust your plan.Ask to see a sample plan and have the advisor talk through the various aspects of the plan and demonstrate how to read it. A good place to start is looking at the plan’s retirement timeline showing how your money might grow and how long it is projected to last.  Ask yourself some key questions as you go along.

  1. Does the plan make sense?
  2. Is it addressing all aspects of a comprehensive retirement plan, not just the investments?
  3. Does the plan address contingencies and adjustments in the event of death or disability?
  4. What hypothetical growth rate are they using to project the growth of your money? Is it realistic?
  5. What distribution rates are they using and how are they justifying that?  
  6. How are they stress-testing the risk-based portfolios? 
  7. Is inflation factored into plans and projections? 

It all needs to make sense, and you need to know the answer to these questions. That age-old saying applies here: If it sounds too good to be true, it probably is! These questions will help you weed out advisors who might over-promise and under-deliver. When the plan is delivered, you must be able to feel confident in understanding how it will work. You should know and understand it well enough to go home and teach it to someone else!

Tracking your plan is equally important as designing it, so be sure to find out what their practices are for tracking and maintaining your plan and keeping you informed. At the very least, you should meet yearly with your advisor for a refresh of your financial data and to talk over any changes in your goals and circumstances. As you get closer to retirement (60+) meeting at least twice a year to refresh the plan is a recommended strategy.

Beyond designing and tracking your plan, you’ll also want an advisor who will communicate with you on a consistent basis, especially when changes are warranted. Make sure your advisor will communicate with you throughout the year with newsletters, market commentary, and regarding regulatory changes that may affect your plan. It is also vital for you to have access to a portal where you can see all your investments in one place so you can track performance and changes. Make sure your advisor is someone you feel comfortable with, so you can pick up the phone and call and/or make an appointment whenever you have a question or concern, rather than just waiting to hear from them.

Step V: Make sure you understand what it costs to work with the financial advisor.

Before you set up the fact-finding appointment with your potential advisor, learn what it will cost to work with them and how they determine that cost. Financial Advisors can be Fee-Only, Fee Based on Assets Under Management or commissioned. Sometimes advisor fees will involve a combination of all these compensations. In addition to the advisor’s compensation, each investment or insurance product will have a cost associated with it. Full disclosure between your advisor and you is a must, and you must ask yourself if you see value in what you’ll be paying for.

Lesson #5: If you’re having trouble understanding and grasping the sample plan it may be a sign that this advisor is not the best fit for you.

Pro-Tip:  A good plan starts with a thorough understanding of what you already have. If you’re feeling comfortable with your advisor so far, at this stage it might be a good time for you and your advisor to take your financial inventory and begin to discuss your ideal retirement picture.

To conduct a financial inventory, your advisor may ask you to bring or send many documents and statements. . You’ll want to provide your advisor with items such as: your cost of living, Social Security benefits, tax return, paystubs, all investment statements, work benefits, real estate, business ownership, life insurance policies, disability insurance policies, long-term care insurance policies, wills and trusts, Power of Attorney, and living wills. Once your advisor has this data, they should go through each document with you, asking questions and learning how this asset was chosen and your history.

If your advisor does not ask for these documents or does not take the time to understand them, this is a clear sign you are working with an advisor who does not embrace true comprehensive planning.  

Once you and your advisor have taken your financial inventory, you’ll want to share your dreams, goals, and wishes for building your version of a successful retirement. Remember, retiring is not about working or not working, it is about being financially independent enough so that you do not have to rely on the income from working in order to cover your expenses. Many people still choose to work in their retirement years. 

Playing the “what ifs” in your plan is critical. You must plan for the unexpected to make sure the plan will continue to work. None of us want to talk about death, sickness, job loss, down markets, or tax law changes, but these are key issues in building your plan and your financial confidence. 

Lesson #6: Full disclosure from both you and your advisor is critical in designing a comprehensive plan. 

Pro-tip: Look for an advisor who will also act as your  teacher. The next appointment should be a combination of teaching and laying out your retirement timeline.

Unfortunately, we are not taught the critical financial literacy we need to make informed decisions. Many of our clients may not even know what to ask. This is why you need an advisor who will take you to school and teach you the basics, so you can both begin to communicate efficiently and understand each other. For instance, as the advisor presents their analysis of your inventory, they should be teaching you the various rules and regulations that are associated with each particular asset. Look for these rules and regulations to be part of your final presentation so you have reference to this information as you think over your plan.

Example: All your Pre-Tax money is referred to as Qualified money which means it is invested before Federal taxes and will be taxed 100% when you withdraw. To avoid penalties, you must not take distribution until after 59 ½ years of age and the IRS requires you take your first RMD (required minimum distribution) by 4/1 of the year after you turn 72.

Ask your advisor for recommended reading or websites, blogs or podcasts that would be helpful for you to continue to sharpen your understanding of finances. A good advisor will provide plenty of resources to support your ongoing education.

At a minimum you should expect to walk away with an enhanced understanding of topics such as:

  1. the taxation of your money
  2. IRS regulations around IRA’s
  3. how your work retirement program works and choices you will make before retiring
  4. key takeaways from your tax return
  5. the various ways income is created in retirement
  6. how life, disability and long-term care insurance work and are evaluated
  7. how to apply for and choosing the right Medicare plan
  8. the importance of putting your team together, including your financial advisor, accountant, and lawyer
  9. investing and market basics
  10. how to prepare for and carry out updates to or create your wills, power of attorneys and living wills

Lesson #7: Ask yourself what you learned, and does it make sense? Can you explain your plan back to your family and other team members?

Presenting the Plan and Investment Strategies 

Once an advisor has built your plan it will be time to have them demonstrate how the plan will work and attach the appropriate investments and insurances to implement your plan. 

A comprehensive retirement plan should show you:

  1. What you’re on track for now given your current level of savings and contributions, viewed at various ages
  2. What you need to do to pursue your actual goal
  3. How death would affect the plan
  4. How a disability or long-term health needs would affect the plan
  5. Distribution strategies and in what order you will need to activate income for your various investments
  6. Your choices of investment options to fit the plan

Lesson #8: There is no perfect investment or insurance product. Make sure your advisor is giving you choices and explaining the pros and cons of each investment.

Choosing appropriate investments and insurance products is about understanding your risk level and what you need that portfolio or product to do. Make sure the advisor is giving you choices of products that could solve those various needs. There are no “perfect” products out there. You simply need to understand the pros and cons of each offering and select the option which fits you best.   

This phase of the planning cycle — of presenting and choosing appropriate investments and products — could be done in 1, 2 or 3 appointments. Don’t be in a rush. Remember, you need to have a strong enough understanding of your plan to be able to explain it to someone else. That’s your test!

Pro-tip: If your advisor has passed your test so far, it’s time to implement and track your plan!

At every stage, it’s really important to remember that your financial planning is a living document. Over the years you and your advisor will review and make changes to your plan as life presents different challenges that necessitate shifts in your planning and implementation.  

Once your plan is in place and you are decidedly comfortable with your advisor, it is a good idea to set the stage with your advisory team regarding how you want to communicate and how often you want to meet. At a minimum you should meet with your advisor and other team members yearly. And, ideally, you should meet the team in the office or virtually and aim to understand each team member's role and how they can help you.   The benefit of having an advisory team vs doing it all yourself online is you are working with real people you can see and get to.

Lesson #9: Don’t wait for your annual appointment. If you need to talk to your advisor or ask a question, pick up the phone and call or make an appointment.

In summary, financial planning and defining your path to and through retirement is critical. You’ll want to do your homework, find good teachers, and be a good student, so your results won’t be left to chance. Learn from these lessons and follow these tips and guidelines which have stood the test for so many clients before you.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Examples provided are hypothetical for illustrative purposes only.