Finding a financial advisor is a crucial process. Essentially, you are allowing them to manage your finances and attain your goals on your behalf. Recently, the Labor Department outlined its new fiduciary rule, in which advisors are mandated to assume a role as fiduciaries when managing the investments of their clients. Bearing that in mind, a credible advisor should meet the criteria outlined below.

Investment Ideology

Different financial advisors. Different experiences. Different investment outlooks. Find a guru whose philosophies are aligned with your objectives and risk appetite. Investment firms offer various trading solutions and techniques, as well as planning and investing method. While every investor or company endeavors to build wealth and avoid committing behavioral biases, it is important to choose an advisor who has the capacity to create a well-diversified portfolio focusing on cost and tax efficiency.


How do they charge the clients? Many of them believe fee-based and fee-only companies are the same. Let’s differentiate the two. Fee-only companies charge an hourly or quarterly rate to their clients, meaning no commission is levied. Conversely, fee-based entities compensate themselves based on a preset percentage of the client’s investments. Ask the prospective advisor about their fee scheme to determine whether your portfolio will be exposed to several fees such as expense ratios. One more thing: the new rules on compensation won’t take effect until 2018.


The federal law supervises fiduciaries who are responsible for overseeing the assets of a client or a group of people. These professionals should act in good faith, prioritize clients’ best interests over theirs, and disclose significant details about them such as fees and any potential conflicts of interest. However, they are still governed by Suitability Standard where they only need to provide recommendations based on the person’s financial condition and preferences.


Is their recommendation suitable for your needs? Advisors should consider their client’s age, income, financial position, goals, risk tolerance, and other related factors. Remember there is no such thing as one-size-fits-all manner of managing your money. Also, many companies, given their size and scope, often fail to personalize recommendations based on the aforementioned factors.