Making important financial decisions can be intimidating and complex, especially when choosing a financial advisor. 

After all, who you hire to help manage your finances will play an integral role in achieving your long-term financial goals. And with the number of available advisors on the rise, it's no wonder that so many individuals and families struggle to compare one advisor with another. Thankfully, we’ve created a tool that can help you quickly compare up to 3 advisors side-by-side.

Here’s everything you need to know to navigate our comparison tool with ease and choose the best advisor for you.

1. Are They A Registered Representative (RR) Or Investment Advisor Representative (IAR)?

One of the first things you’ll notice when comparing advisors is that some are Registered Representatives (RR), others are Investment Advisor Representatives (IAR), and some are both. 

But what does that mean for you?

At a high level, IARs are held to a greater standard of care when advising their clients. This is known as the fiduciary duty, and it means they must act in the best interest of their clients at all times. Alternatively, RRs are held to a lower standard called the suitability standard. This means they must give advice that they feel is reasonably appropriate for the given client. But, some advisors are both, meaning they are held to the fiduciary duty when acting as an IAR, and the suitability standard when acting as an RR.

Ultimately, given a choice, most people would prefer to work with an advisor who is a fiduciary at all times to ensure the advice they receive is always in their best interest. That said, advisors that are held to the suitability standard can still do phenomenal work, they just don’t have the same fiduciary duty to their clients. 

2. Compare Their Past: How Many Years of Experience Do They Have and Do They Have Any Disclosures to Report?

Next, when comparing financial advisors, one of the most important things to consider is their past.

As you use the compare an advisor tool, you’ll see “Experience” and “Disclosures” listed for each advisor. 

First, how many years of experience do they have as a financial advisor? While experience won’t tell the whole story, it can be a great indicator of expertise. For example, given a choice between a brand new advisor with one year of experience or a seasoned professional with 30 years of experience, most would opt for the more seasoned advisor. That’s because by working with an experienced advisor, you can rest assured that they have years of hands-on experience working with clients to achieve their financial goals. In addition, years of experience can be a great indicator that this advisor is here to stay and won’t end up washing out of the business in a couple of years.

Next, as you review their past, identify whether or not they have any disclosures to report. Financial advisor disclosures include past regulatory, criminal, or disciplinary actions they must report, along with civil penalties, customer disputes, fines, financial, civil bonds, liens, separations with employers or judgments. Again, disclosures won’t tell the entire story, but they can indicate any wrong-doings in your potential advisor’s past and any red flags to consider. Reviewing their disclosures can help you make an informed decision and choose an advisor who won't just meet your requirements but will exceed them in a safe and trusted manner.

So, as you begin your search, look to the past as you compare different advisors to help understand how long they’ve been in the business of financial advice and whether they have any regulatory disclosures to consider. 

3. Identify Their Credentials To Ensure They Are A Certified And Competent Financial Professional.

It's important to be informed when comparing financial advisors. 

Fortunately, various credentials for financial advisors can help you identify their qualifications and competence, and our tool lists any credential your potential advisor holds. There are many to consider, but the CFP® (Certified Financial Planner) credential is one of the premier credentials in the field and is considered by many to be the gold standard in financial planning. 

To become a CFP® professional, advisors must meet a minimum experience requirement, pass an industry exam, and complete their education and coursework requirements. Most importantly, to maintain their CFP® credential, advisors must uphold a fiduciary oath to act in the best interest of their clients at all times. With this credential, you can rest assured that your advisor is competent in the various areas of financial planning and that they always have your best interest at heart. 

But the CFP® credential isn’t the only one to consider. Other noteworthy credentials to consider are:

• Chartered Financial Analyst (CFA) — this is an incredibly challenging designation to complete and is primarily focused on investments and portfolio design.
• Certified Private Wealth Advisor (CPWA) — this credential is geared towards advisors who work with high-net-worth clients, typically with $5 million or more in assets.
• Chartered Financial Consultant (ChFC) — this designation is similar to the CFP® but focuses more on estate planning and employee benefits.

Ultimately, the key is to identify the credentials that are important to you as a consumer and filter your advisors accordingly. And while having credentials won’t guarantee that your advisor is the right fit for you, at the very least, it can ensure a baseline level of competence.

4. Understand Their Firm’s Typical Client Profile — Does it Match Your Situation?

As you compare advisors, it’s important to understand their firm’s typical client profile to determine whether they are a good fit for your situation. 

Fortunately, our tool breaks down each advisor’s firm information, highlighting a number of important metrics, from average account size to total assets under management.

One good place to start is with your net worth, which you can calculate by subtracting all your liabilities (things you owe) from your assets (things you own.) The result is your net worth. And different levels of net worth will come with different strategies and planning considerations, so identify where you’re at currently, and see if that aligns with the typical net worth of your prospective advisor. For example, if you’ve got a $500,000 net worth but your prospective advisor typically works with clients with $2 million or more, they may not be the best fit for you. That’s because the typical strategies and planning opportunities they focus on with their clients may not apply in your situation. 

Ultimately, using these filters can help you gain clarity on what type of client’s your advisor typically works with and whether you fit that description or not.

5. Next, Consider Their Current Client Load.

It's essential to consider the number of clients each potential financial advisor currently manages, which you can estimate using our tool.

For example, if an advisor already has over 200 clients, it may indicate they are too busy to give you the personalized attention you want. When looking into an advisor's workload, explore if they have any team members that could provide additional support. While having plenty of experience is beneficial, providing quality service in a timely manner is also key when selecting your financial planner. Researching their current client load can help determine where your needs lie on their priority list and find the best fit for you.

And while the right number of clients for each advisor will vary depending on workflows, support, and advisor capacity, industry expert Michael Kitces advocates that advisors should aim for a maximum of 100 to 125 clients to ensure they provide the best service to their clientele.

6. Review Their Services And Expertise to See What Fits Your Needs.

Next, comparing advisors’ services and expertise is essential to ensure they are a good fit for you. Our tool lists out any key services or expertise that your prospective advisor offers.

As you review, it can help to start with you—what services are you looking for, and which areas of expertise do you want your advisor to have? For example, if you’re a young married professional with a child on the way, you may want an advisor that offers cash flow planning, investment advice, and college planning. Alternatively, if you’re an empty nester with a few years left until retirement, you may want an advisor who’s an expert in transitioning to retirement and offers investment management, social security planning, and retirement tax planning.

Fortunately, most advisors will list the services they offer, which can include:

• Retirement planning
• Investment management
• College planning
• Estate planning
• Insurance planning
• Employee benefits analysis
• Tax planning

And while most advisors will have a baseline level of competence in all areas of financial planning, most advisors will be experts in two or three. So, the key is to identify the most important areas for you and find the advisor that aligns with those areas of expertise or offers the services you need most. 

7. Lastly, Consider Their Investment Minimum, If Any.

Lastly, consider whether your prospective advisors have an investment minimum. This is a minimum level of investable assets they would require before you can work together. If their investment minimum exceeds what you can invest, that is an easy filter to remove them from your search.

“A lot of people are intimidated by financial advisors because we hear of so many of them who have a minimum account size of a quarter million dollars or more,” says Leonard Kim of AdvisorCheck. “However, those minimum account sizes are for firms that specialize in making big moves with large amounts of money in the stock market and other markets. There are many financial advisors and firms out there that do allow for people to come into their operation with no account minimums, or a very low one. Many people may be completely unaware of this, but the barrier to entry is not a one size fits all equation, and this allows people who live regular lives to have an opportunity at living a prosperous life,” Leonard continued.

Hopefully, with all these points in mind, you can compare and select the best financial advisor.

Remember, be sure to look into their experience and any potential disclosures that may exist. Review their credentials and ensure they match what you are looking for. Identify their typical client profile and make sure it fits yours. Consider the services they offer, as well as their expertise. And finally, assess their current client load to ensure you get a dedicated advisor with time to answer your questions. 

And AdvisorCheck is here to help.

Fortunately, our tool is geared to help you quickly compare and identify the best financial advisor for you.

With our new compare an advisor tool, you can add up to three advisors at once and compare them side by side using a variety of metrics. Our revolutionary tool highlights years of experience, credentials, disclosures, services, number of clients, and more. That’s everything you need in one place to quickly find and choose the best advisor for you. 

Make sure to sign up for a free AdvisorCheck membership to get access to all of our comprehensive, easy to digest research about financial advisors and tools to make determining which financial advisor to work with as easy as possible. 

Written by Anders Skagerberg, CFP

Fact checked by Billy Quirk

Reviewed by KJ Kim

Disclosure

The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

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