Fiduciaries are legally required to place clients’ best interests first. Stockbrokers and mutual fund salespeople (like those in banks) typically aren’t.
Don’t simply ask “What is your fee?” A good advisor will also provide you, clearly, in writing, the costs of the investments they recommend.
Some advisors earn commissions on the investments they recommend. You want an advisor who’s not influenced by their compensation.
Advisors have been known to jump firms for signing bonuses (to bring their clients with them). Avoid career-changers with only a year or two of experience. Pick a longtime advisor whose career is stable.
Who serves you if your advisor goes on vacation or is hospitalized? You want others in the firm to be familiar with your situation, too.
The best advisors have a personal story. Ask them to tell you.
Hire someone who loves being a financial advisor. It’s their calling. Not someone who wants to join management.
Ask this before you discuss your specific situation. If their typical client sounds like you, they could be a good fit. Don’t ask for references. Advisors won’t provide unhappy ex-clients’ names. Instead, visit sec.gov/check-your-investment-professional.
These three situations are related. Advisors should articulate a strong point of view on how money should be invested. An advisor who says, “It depends on the client,” is likely an order taker, not a true advisor. You don’t want that. You also want to know if their investment strategy remained consistent from 2007 to 2020, even with 2008’s financial crisis and COVID-19. If not, why – and when – did they change their advice? If what they recommend now is drastically different, you should wonder if you can trust what they advise today. Don’t hire someone whose advice lacks long-term consistency.