Choosing a Financial Advisor/Planner

Choosing a financial planner or advisor is one of the most important decisions an individual or household can make.  Following are the criteria I would want my wife to follow if something were to happen to me.  [Something were to happen” is a polite means of stating I have reached my personal life expectancy.]  Since we were married and then I became a financial advisor, she has never really chosen one.  If I am not around, [another euphemism], I would tell her to base her decision on the following criteria:  Education, Experience, Compensation, Services, Company.

  • Note:  Though financial planner and financial advisor are often used in the same manner, I would suggest there is a difference.  In my estimation, financial advisor can provide information and recommendations on a specific produce or strategy while a financial planner is trained, has expertise and experience in all areas of financial planning,


Many if not most financial advisors have some initials behind their names.  If the initials are not CFP® it will take more research to determine if the proposed advisor has a quality education in financial planning or simply some initials.  Some sets of initials or designations are related to successfully selling a product or achieving financial success with a particular company.  Others have minimal time and expense commitment limited if any academic training.

With a CFP®, the potential client knows the advisor has completed instruction and passed an extensive exam addressing eight separate “Principal Knowledge Topics” related to financial planning and money management.  The pass rate for each comprehensive exam generally ranges from 50-60%.  According to research, about 20% of financial advisors have obtained the CFP®  designation.  In addition, a CFP® has CE [continuing education] requirements on an ongoing basis. 

Generally, if the advisor is not a CFP®, this would be a deal breaker for me, but there are exceptions.

Being a CFA [Chartered Financial Analyst] is an exception.  CFA one of the most difficult and challenging designations to obtain in the financial service business.  Completing the program requests passing three levels of exams with the for each level offered annually worldwide.  A passport is the required form of identification at each testing center.  Since 1963, of the over 1.3 million candidates who sat for Level I, about 210,000 or 15% have passed all three Levels.  A CFA accompanied by a CFP is outstanding credentials.    

Being a CPA by itself would not be an exception, but being a CPA and a CFP® is an outstanding background for a financial planner. 

A relatively new designation is the Life Planner certification.  Life Planners are trained in the process of coordinating financial goals with life goals.  For a quality program, the training is rigorous and requires both a significant time and money commitment.  With a designation such as this, it is important to review the program on the website of the sponsoring organization.   A Life Planner certification is best when it is accompanied by other quality certifications such as outlined above. 

When meeting with a proposed planner, if the initials are not as outlined above, it is very important to determine the quality of the educational background. 


Assuming the advisor being considered is a CFP®, or another high-quality designation, next it is important to consider experience.  For example, at this time, I have over 40 years of experience in the financial service industry.

But experience, like initials or credentials must be examined.  A financial advisor should have experience in all areas of financial planning and money management including, but not limited, to budgeting, debt reduction, tax planning strategies, saving for retirement including various types of retirement plans and options, various investment options, investment criteria and strategies, risk management including types of insurance and estate planning. 

For example, an advisor, who has multiple years of experience as health insurance or life insurance agent, may be very knowledgeable in either or both of those fields, but that is not qualified experience in all the areas of financial planning.


There is a saying I heard many times.  It is, “if the advisor receives most if not all compensation from selling one specific produce, be it life insurance, annuities or some type of investment, “it does not matter what the question is, the answer will be more of that same product.

First, it is important to understand the difference between a commission and a fee.  A commission is paid to the advisor by a company for whom the advisor is selling a product.  A fee is paid directly to the advisor by the client. 

It is also important to understand the commissions for some products can be very lucrative for the advisor and their marketing organization.  For example, with many life insurance or annuity products, the commission paid to the advisor and marketing organization is related to the surrender charge. 

  • For example, if the surrender charge on a specific annuity is 8% declining to 0% over the first eight years, then it is reasonable to assume the gross commission paid is around 8%.  The advisor may receive all of this or part depending on the specific marketing contract.  The same is likely to be true with a permanent life insurance product [whole life or universal life.]  if the surrender charge is 100% of the first-year premium, then it is likely the gross commission is around 100%.
    • Note:  It is possible to buy both life insurance and annuity contracts which have no surrender charges or commissions paid to the advisor.  These products are completely fee-based which are disclosed in advance. 
  • Some advisors and marketing organizations will state there is “no sales charges”.  This can be misleading as they can be referring to a front-end sales charge.  Generally, if there is a surrender charge, there is a commission being paid.  In interviewing and advisor, specifically ask how the advisor is being compensated and if the compensation is a percentage of the investment or premium.  A quality advisor will have no issue with full disclosure. 

When interviewing a potential advisor, obtain detailed information on how the advisor is being compensated and if compensation is from more than once source, what the percentage is from each source.  If the majority of compensation being paid to the advisor is comes for a single product, it is very likely the advisor is going to recommend this product.

Though I believe fee-based is the best option, a fee by itself does not insure either fairness or transparency.  For example, one firm, be it financial planning, law or accounting may charge substantially more for the same or similar work than another firm.  Fee’s must be transparent and it is essential potential client have a complete understanding of the total fee structure and what services are covered by the fees. 

  • Note:  Generally, any financial planning firm, or law or account firm for that matter, who tells a potential client they simply charge for their time, is a huge red flag for me.  

Historically, with financial planning firms, an asset under management [AUM] fee has been the most popular and has many benefits.  An increasing number of firms are offering a retainer option in which the planner or firm provides a variety of services outlined in the contract on an annual basis for a flat fee.  I suspect this option will be increasingly popular in the future. 

Finally, some financial planners charge an hourly fee or at least have hourly as an option.  I have decided to charge only an hourly fee because I believe there is a need for more hourly financial planners, especially with my combination of experience and credentials.  In addition, I priced myself moderately at $150 hour which I believe is competitive if not lower than others with my combination of experience and credentials.  With hourly, it is normal to provide an estimate of total hours.  In my case, I provide a binding estimate of the maximum hours, which means the total fee may be lower, but not higher.   


A potential client should have list of services provided by an advisor, and if the services are covered in the base fee or are an additional fee.  


I have a strong bias regarding company.  I strongly believe most individuals and/or households are best served working with a planner who is or is part of a firm which is a Registered Investment Advisor [RIA].   In addition, I would suggest looking for an individual whose career objective is to be a planner and has the potential to serve a specific client’s needs for many years.  I would suggest an individual or household is best served by building a long-term relationship with a planner and planning firm which has satisfactorily met the previous criteria. 

Working with a large company, calling a 1-800 number for information, service or advice, may be satisfactory for a specific situation, but I would suggest not the basis for a long-term planning relationship.  Often the service individuals working for large institutions are promoted, transferred, leave the company for various reasons or are terminated, also for various reasons.

When interviewing a planner, assuming the above criteria have been met, select the planner and firm who you believe will best serve your financial needs for years to come. 


My wife is fortunate.  If I am not around, our children, Courtney and Morgan, were partners in my previous firm have started their own firm, Trailhead Planners.  They meet all the above criteria and I expect their firm, of which I am a part owner, to be around for many years.  Most households do not have children who have met all the above criteria, so it is important to practice personal due diligence and select a planner and planning firm which best meets your needs. 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.