How to choose a financial advisor

The short answer

Hire an investment adviser representative who is a fiduciary at all times, is compensated in a way you can describe in one sentence, holds a CFP, CFA or CPA/PFS credential, and has a clean record on the two free public databases: Investment Adviser Public Disclosure and FINRA BrokerCheck. Then interview at least three firms, because pricing and scope vary enormously for identical work.

Fiduciary vs. suitability, and where Reg BI fits

Two different bodies of law govern people who give investment advice, and the difference is not marketing.

Investment advisers: fiduciary duty

Registered investment advisers and their representatives owe a fiduciary duty under the Investment Advisers Act of 1940, which combines a duty of care and a duty of loyalty and runs for the entire relationship, not just at the moment of a recommendation. A CFP professional takes on a parallel obligation: the CFP Board's Code and Standards states that "at all times when providing Financial Advice to a Client, a CFP professional must act as a fiduciary, and therefore, act in the best interests of the Client," including a duty to place your interests above the firm's and to avoid or fully disclose and manage material conflicts (CFP Board).

Broker-dealers: Regulation Best Interest

Since 2020, broker-dealers and their registered representatives must meet Regulation Best Interest, which establishes a best-interest standard of conduct when making a recommendation to a retail customer about a securities transaction, an investment strategy involving securities, or a type of account (FINRA). Reg BI replaced the old suitability standard and is a real improvement, but it attaches to recommendations rather than to an ongoing relationship, and it permits conflicted compensation that is disclosed and mitigated rather than eliminated.

Many professionals are dually registered and switch hats mid-conversation. That is legal and disclosed, but it means the standard you get depends on which account is open, so ask which capacity applies to each recommendation.

Credentials that mean something

• CFP (Certified Financial Planner). The default credential for comprehensive personal planning: coursework, a board exam, an experience requirement and the fiduciary Code and Standards described above. Verify status directly with the CFP Board, not on a business card.
• CFA (Chartered Financial Analyst). Three exams focused on investment analysis and portfolio management. Strong signal on portfolio construction, less specific to household tax and cash-flow planning.
• CPA/PFS. A CPA who has added the Personal Financial Specialist credential. The right hire when the tax return drives the plan, which is common for business owners and high earners doing conversion work.
• Series 65 or 66 license. A regulatory requirement to give advice for compensation, not a credential. Everyone advising you has one; it distinguishes nobody.
• Ignore the alphabet soup. Designations you can earn in a weekend, especially "senior" and "retirement specialist" titles marketed alongside annuity sales, carry no meaningful curriculum or ethics enforcement.

Credentials are a floor, not a ranking. A CFP who sells one product family is worse for you than an uncredentialed adviser with a clean conflict profile, though the combination of both is what you should be shopping for.

How to read a Form ADV in 10 minutes

Form ADV is the registration document every adviser files with the SEC or state regulators, and the public version tells you almost everything you need. The SEC's own bulletin describes the structure: Part 1 covers the firm's business, ownership, clients, employees, business practices, affiliations and disciplinary events; Part 2A is a plain-English narrative brochure with 18 disclosure items covering business practices, fees, conflicts and disciplinary history; Part 2B is a supplement about the individual who will actually advise you; and Part 3 is the Form CRS relationship summary (Investor.gov).

Read these in this order:

• Item 5, fees and compensation. The actual schedule, whether fees are negotiable, whether they are billed or deducted from the account, how often, and what other costs you pay including brokerage, custody and fund expenses.
• Item 6, performance-based fees. If the firm charges them on some accounts and not yours, it must explain the conflict and how it is managed.
• Item 8, methods of analysis and risk of loss. Vague strategy language, or heavy reliance on frequent trading, is a signal.
• Item 9, disciplinary information. Material legal or disciplinary events. Certain recent events are presumed material.
• Item 10 and 14, affiliations and third-party payments. Insurance affiliates, broker-dealer affiliates, revenue sharing and solicitor arrangements all live here.
• Part 2B on your specific advisor. Education, ten-year work history, other business activities and any outside compensation.

Part 1 filings and the brochures are free on IAPD, and advisers must deliver the brochure to clients plus an annual summary of material changes. On BrokerCheck, the same person may show a separate record: read the employment history for short stints at firms with enforcement histories, and read every customer dispute in full rather than counting them.

12 questions to ask before you hire

1. Will you act as a fiduciary to me at all times, in writing, for everything you recommend?
2. How exactly are you paid, and does anyone other than me pay you anything related to my account?
3. What will I pay in year one in dollars, including fund expense ratios, custody, platform and trading costs?
4. What is your fee schedule at each breakpoint, and what is my blended rate?
5. Are you dually registered as a broker-dealer representative or licensed to sell insurance? Which hat applies to which recommendation?
6. Who custodies my assets, and does anyone at your firm have direct access beyond deducting fees?
7. What does your planning process cover beyond investments: tax projections, Roth conversions, Social Security timing, insurance, estate documents?
8. How many households do you personally serve, and who covers me when you are away?
9. What is your investment philosophy, and can you show me the average expense ratio of the portfolio you would recommend?
10. Do you use proprietary products, or receive revenue sharing from any fund or platform?
11. Has any regulator, client or former employer taken action against you? Walk me through what is on your ADV and BrokerCheck records.
12. How and when do you communicate, and what happens in the first 90 days if I engage you?

Ask question 3 first if you only get one. Our advisor fee guide gives you the benchmarks to judge the answer: median all-in costs run about 1.65% for portfolios up to $1 million and 1.50% above it, so a quote materially above that needs a reason.

Fee-only vs. fee-based, in plain terms

Fee-only means the firm and its representatives receive compensation solely from clients: asset-based fees, flat retainers, hourly or project fees. No commissions, no trails, no revenue sharing.

Fee-based means fees plus commissions. It is one letter and an entirely different conflict profile. A fee-based advisor may charge 1% on your portfolio and separately earn a commission on an indexed annuity or a life policy, which is disclosed but still shapes the recommendation.

Neither is automatically disqualifying. A commission is a rational way to pay for a one-time insurance purchase, which is exactly why PolicySherpas exists on the insurance side. What matters is that you know which is happening at each moment, and that nobody presents a commissioned product sale as objective advice. If a firm calls itself fee-based, ask what percentage of firm revenue came from commissions last year.

Red flags that should end the conversation

• Guaranteed or "can't lose" returns. No legitimate adviser guarantees market returns. Guarantees exist only in insurance and bank products, and are limited to the issuer's claims-paying ability.
• Pressure to move everything at once. Urgency around a "closing window" on an annuity, a private deal, or a rollover is a sales tactic, not planning.
• Custody outside a major independent custodian. Checks payable to the advisor or the firm rather than to a third-party custodian is the single largest fraud pattern regulators see.
• No written fee schedule. It is required in Item 5 of the Form ADV Part 2A brochure. A firm that will not hand it over is telling you something.
• Undisclosed disciplinary history. A disclosed and explained event can be forgivable. An event you discover after the meeting is not.
• One product for every problem. If every case study ends in the same annuity, whole life policy or private fund, the diagnosis was written before the exam.
• Plans without tax detail. A retirement plan that never mentions brackets, IRMAA thresholds, or the RMD age of 73 is a sales illustration in a binder.

Finally, use the free tools every time, not just the first time. Check your advisor's records again each year; disclosures are added continuously, and the SEC's own guidance to investors is to ask and check before hiring anyone.

PolicySherpas advisory services are offered through a registered investment adviser, and nothing on this page is individualized investment, tax, or legal advice. Registration status, licensing and available services vary by state.