How to Choose an Investment Advisor

A lot of the decisions you have to make in the investment process are emotional. They should be, because they will affect the people you care about the most. That’s why no matter how smart and rational you are, it helps to work with someone else. Even financial advisors work with financial advisors. It’s economics; but it’s also psychology. We are often blind to our own biases and mistakes. The advisor serves as a check and a balance to your own inclinations, protecting you from yourself.

So if you’ve decided to seek the help of an objective financial advisor, the next question is “Who?” and “How do I identify him?”

The following are some of the elements to consider:

Understanding Your Personal Goals and Needs
Your first meeting with an advisor should involve lots of questions – about your life, your family, and your goals, so your advisor can have a full picture of what’s important to you. Without an appreciation for your unique position, no advisor can do a good job for you.

Conflicts of Interest
An advisor is not a salesperson. Obviously, a Ford dealer is not going to tell you that a Jeep would be best for you and your family; you know walking in there that he’ll try to sell you a Ford. They call themselves automobile salesmen, not advisors, and we don’t expect them to give us purely unbiased advice. But in the financial realm, it’s peculiarly permissible and common for the lines between salesperson and objective advisor to blur. Many so-called “advisors” are really stockbrokers who make money from sales commissions, and try to cloak themselves in the image of objectivity. They have every incentive to put their and their firm’s interests above your own, which unfortunately they often do.

The main difference between a stockbroker (who holds a Series 7 license) and an SEC-registered investment advisor (who holds a Series 65 license) is that only the latter is bound by a fiduciary duty. That means they are required by law to act in your best interests, and put those before their own.

First, do a simple background check to make sure your advisor has a Series 65 license. You can do this at the “BrokerCheck” website ( provides information about the advisor’s employment, registrations, and licenses, as well as any investment-related investigations, disciplinary actions, arbitrations, criminal records, or bankruptcies.

Once you sit down to talk with a potential advisor, ask about conflicts of interest. An honest advisor will readily disclose the scope of his own potential conflicts.