How To Choose A Financial Advisor - Due Diligence Simplified

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It's hard to know how to choose a financial advisor.

There is so much value at stake; yet, how can you tell the experts from the charlatans?

Who can you trust? How do you really know?

After all, you are busy with kids, a career, and life. You want to be able to trust someone to make sure your financial planning is on track, but it's a den of thieves out there.

Adding confusion to concern are all the sound-alike titles such as brokers, registered investment advisors, certified financial planners, financial coaches, and financial consultants to describe similar services. Who can tell the difference?

It's time to pull back the curtain on all the techno-babble so that you can find the best financial advisors and eliminate the posers.

In this episode I'll give you a step-by-step due diligence process for how to choose a financial advisor that fits your needs.

Related: How Your Financial Advisor is Taking 75% of Your Retirement Income (or More!) Video, PDF download, or Audio.

You will learn how to sort your way through the maze of confusion so that you can get the expert help you need to reach your financial goals… without getting ripped off.

In this episode you will discover:

Why the starting point to choosing a financial advisor is looking inward.
How to match your specific needs to the right specialist (not all advisors are created equal).
Why the common practice of using referrals is dangerously flawed.
The 4 advisor compensation models and how each impacts the advice you receive.
Form ADV disclosure, what it says, and how to get one from your advisor.
6 different financial planner search sites so you can pick the right professional for your needs.
Why the “fee only” compensation model means different things in different situations (this is important!).
How to analyze a financial advisor web site.
Whether or not it is even relevant to meet your advisor face-to-face any more.
Where the future of financial advice is heading (this may surprise you!)
How to understand the hidden financial incentives hiding behind the advice your receive.
A checklist of quality factors to use when judging your financial advisor.
What “assets under management” really says about your advisor, and why it's not an important quality indicator.
How to know the difference between CFP, CPA, PFS, RIA, CFA, and CHFC. (Yikes!!)
Why all these professional designations imply little about investment skill.
The surprising reason financial advisors don't provide investment track records.
Why GIPS audited track records are rare (guess what? It's the same reason they are the gold standard in performance disclosure).
Why there is no perfect advisor compensation model (each has an Achilles Heal that you must watch out for).
The key difference between the suitability standard and fiduciary responsibility (well worth knowing).
and much more….

Resources and Links Mentioned in this Session Include:

Michael's financial advisory business site is Pinnacle Advisory Group.
Michael's personal site is at Kitces.Com and his blog is the Nerd's Eye View.
Here's a listing of some of our more popular financial and investment due diligence articles to supplement these insights.
My 7 Steps To 7 Figures Wealth Building Course.
You can learn more about my financial coaching services here.
My article explaining how different compensation models bias the financial advice your receive .
My tutorial directory of articles about financial advice related topics.
Plannersearch.org for finding a CFP in your area associated with the Financial Planning Association.
NAPFA.org for fee-only financial advisors (could be asset based or hourly).
GarretPlanningNetwork.com for locating exclusively hourly fee advisors for asking a few questions.
BrokerCheck.FINRA.Org to look for enforcement violations against your advisor.
Brightscope.com for advisor due diligence and disclosures.

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Comments

hfl_property

I was thinking about this podcast in combination with the “What frustrates you” thread from earlier and some of the Wade P. podcasts. I think part of the catch is people seem to want a static strategy in a dynamic world. Nobody wants to make a dumb mistake, but I think one should expect that the strategy that they will employ, even in retirement, is likely to change. I think this makes people uncomfortable because they feel like the work isn’t complete. It’s not a fully developed thought yet, but in short there won’t ever be a perfect solution, but we get to keep working towards better ones and that’s a lot of fun. I mean, would you want to employ the strategies they used 50 years ago? I doubt they’d work. But thanks to folks like Wade P. we are learning and exploring more intelligent ways to manage money and that’s really rewarding.

Thanks for the site.
- Todd Tresidder
  
  hfl_property Thanks for joining the discussion. Yes, my experience is people are inherently uncomfortable with uncertainty. We want to KNOW it will work. Yet, the inherent nature of investing is that it’s all about taking on risk with a bet into an unknowable future. Any attempt to believe in certainty is an act of self-deception. In the end, the best you can do is a probabilistic outcome. I will be sharing a lot more on this in coming months as I develop an advanced investing series of podcasts. I also have a “fun” episode coming up on EV or mathematical expectancy. It’s all fascinating stuff with real word applicability. Again, thank you for sharing your thoughts…
frank_manzella

Great Topic….I’m a big fan of referrals…Sometimes it works and sometimes it doesn’t as you pointed out. I’m in the process of building a team of professionals and I thought this show was really helpful. Thanks for including the resources in the show notes.
Amy Winters

Thanks for pointing out that we should make sure to choose a financial adivsor we can trust, since we’re already so busy with our career and life in general. My husband and I are interested in getting some professional help with our retirement. I didn’t think it was a huge deal which financial advisor we chose, so thanks for letting me know I should take the decision more seriously.