How To Pick A Financial Professional

Source: CBS® | The Big Bang Theory

The expanse of personal finance experts is so dizzying and convoluted that even Sheldon wouldn’t want to decode it. It doesn’t take a PhD to know that if you earn interest on your money, you’ll end up with more than you start with. But considering the average american makes 6 to 10 money-based choices a day, how do you find someone to help guide you with all those decisions? Do you need a Financial Planner, Advisor, Counselor, Hedge Fund Manager or all of the above?! And which one do you talk to about insurance, taxes, your 401k or small business questions? Does a Personal Finance “Go-To” exist? In this post we’ll teach how to find a financial advisor that will help assess your situation and do what’s best for you.



Good to know

There’s a buzz word in the industry called ‘Fiduciary Standard‘. It’s a strange word but what it means is that an advisor with fiduciary responsibility must act in the best interest of their client, putting their client’s interest ahead of their own at all times. Now you would think that anyone managing someones hard earned savings would have to abide by these standards, right? WRONG! The majority of financial professionals out there do not have to follow this principle. WTF right?


A lot of the stockbrokers and advisors at firms like Merrill Lynch, Morgan Stanley, Fidelity, etc do not have a fiduciary duty to their clients. Instead, they fall under what’s known as the ‘Suitability Standard‘. This means that as long as they can justify that a particular product is suitable for their client’s situation, they can sell it to them – even if it’s more expensive and pays them a fatter commission.


Source: Carl Richards |


To circumnavigate the unnecessarily confusing and numerous distinctions, licenses and certifications of the Financial Services Industry, we’ve put together a dictionary-style summary to boil it down to what you need to know. If you like being confused, go watch Inception…again.


Money Professionals: DEFINED


Stockbrokers: The “old” Wall Street. Who your parents hired back in the dark ages because it was the only way they could get access to the stock market. This was obviously before the existence of the internet and online trading. You may remember them calling this person up to get an update on their portfolio performance.


Financial Advisors: This is a generic term that can be used by anyone who doles out advice on subjects that range from taxes to investment advice. You’d need to do a little more digging to find out how a particular financial advisor works (how they are compensated will tell you how they are incentivized). Most work at a large broker/dealer (like the Merrills/Morgans of the world) and fall under the Suitability Standard & make money when they sell you products or trade your account.


Financial Planners: This is a tricky one. You may have heard the term CFP (Certified Financial Planner) before. We have some beef with this designation. A lot of the large firms, pay for their Financial Advisors to take the course, corresponding exam and then tack these letters on to their business cards. It definitely looks good but from our experience, these are mostly just “sales people” who are incentivized to achieve this designation but don’t actually practice financial planning. Be sure to ask about their process before hiring one.


Investment Advisors/Asset Managers: A lot of the new robo-advisors like Wealthfront, Learnvest and Personal Capital would fall under this category. They take your savings and invest it for you, not always with a goal in mind. Investing for the sake of investing is a slippery slope. It’s good to have goals in mind when you decide to start investing. We always get the “I have X dollars to invest, what should I buy?” It’s not that simple and for a good reason. If someone answers that question without asking you any follow up questions, beware. That’s called gambling.


Registered Investment Advisors: This term doesn’t refer to a person or job function but a type of firm whose advisors fall under the Fiduciary Standard to serve in their client’s best interest (see Fiduciary Standard above). There are numerous RIAs out there and each might focus on a different type of client, some serving high net worth individuals, some serving doctors, others working only with female entrepreneurs, etc.



The list doesn’t end there, but for the sake of keeping this short (ha!) and sweet, let’s discuss the inherent question, “so which one do I need?”…


Before hiring a financial pro, you want to verify that they are a fee-only advisor. You also want to make sure they have an obligation to act in your best interest (known as the Fiduciary Standard). You want this because it means their interests are aligned with yours. It would also be good to know if they sell product created by the firm they work for (i.e. proprietary product).


At Stash, we start by helping you create a plan that defines what you want in life. We call it goals-based planning, which means you figure out what you’re saving and investing FOR and let those goals dictate what you should be investing IN. The investments become the solution to your needs, wants and wishes. Wall Street loves to take your money and put it in the market because that’s how they get paid. Finding someone who gets paid to help you achieve your goals seems to make a lot more sense to us – what do you think? Comment with your experience, positive or negative, to help our readers get a better sense of their options when hiring a personal finance professional.

SHOWHIDE Comments (3)
  1. Although overall, the points you make are great, there is a whole sector of the profession you are omitting: the real fee only independent financial advisors who do not sell anything. There are a few really good sources to find them such as the XY Network, the Garrett network or NAPFA Portraying the picture that every financial expert is out there to scam you, is inaccurate.

  2. Agree that many with the CFP designation do not practice financial planning. However, because it is a rigorous exam, the MAJORITY of advisors at large financial firms do not have the designation. There are also many solo financial advisors, and advisors at smaller firms, that choose to invest the time to attain the CFP. Although one with the CFP does not necessarily mean they do financial planning, I would argue that it should be a bare minimum requirement for advisors that do practice financial planning. I agree with Inga that NAPFA is a great resource to find a great fee-only financial planner

  3. Suggestion: legibly source images and ideas. The image used belongs to Carl Richards - Carl’s name is illegible – even with 20-20 vision and a retina screen.

    With good intentions – @jesseredmond


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