Financial Advisors

Financial advisors (also called financial planners) are professionals who help you plan your financial future. A quality financial advisor should discuss every aspect of your life with you, from your income, debt, and future goals (retirement, children's college funds, etc.) to investing, insurance, taxes, and wills. Unfortunately, most so called financial advisors actually do little more than sell you funds or insurance, often to benefit themselves more than you. A financial advisor should be more than an investment advisor or salesman.

Why Hire a Financial Advisor

You may or may not need a financial advisor. If you have a solid plan for your future that includes a realistic path to your retirement goals, the needs of your children if you have any, investments, insurance, taxes, and your estate, then you're probably ok on your own. You can also hire specialists to separately manage or assist you with each individual component. But if you feel you need help creating a unified plan for your financial future, then a financial advisor would be a great asset for you.

Another benefit of a quality financial advisor is that all aspects of your finances are managed by one person. Your investment decisions will affect your taxes for example, so having one person to help you with both taxes and investments will ensure you make the best choices based on both factors.

Choosing a Financial Advisor

Choosing a financial advisor isn't easy, and if you don't know what to look for you're likely to be either under served or even taken advantage of. There are three primary areas you should consider when choosing an advisor: philosophy, fees, and history.


You should discuss your financial advisor's philosophy before you sign on. Talk about your goals, and make sure you feel comfortable with his approach and vision for your future. Regarding investing, your advisor should have a long term outlook with diversity as a fundamental principle. You don't want an advisor who is attempting to time the market to make quick gains, as this amounts to gambling with your money.


Fees are an extremely important issue, and one you should pay very close attention to. Financial advisors (and also investment advisors) generally make their money by charging you a fixed fee only, a commission, or a combination of both. While there are pros and cons to each method, at our preference is the fee-only model. An advisor who charges you a fixed fee only does not have the incentive to sell your anything in particular, other than what is best for you. Whereas an advisor who makes commissions will have a conflict of interest due to making more money by selling you particular products, some of which may not be in your best interest. In addition, advisors who are paid through commissions have an incentive to unnecessarily buy and sell financial products to make higher commissions, adding to your transaction costs.


Ask your financial advisor to provide you with his or her historic rates of return for either a typical portfolio or a customer similar to you in age and investment strategy (level of risk and aggression). You should be able to get annualized returns net of fees, ideally going back through market cycles that allow you to see how the portfolio performed as the market changed. Compare these results to the results of other investment companies and advisors.

Additional Considerations

No matter how much you trust your financial advisor, you should never make out a check to him or her personally. You may need to send checks to you financial advisor, but they should only be made out to the institutions that hold your investments. You never know what chances an individual might take with your money, and you don't want to end up like so many others who gave their money to people like Bernie Madoff!