Selecting a Financial Advisor

Sep 2019


A couple weeks ago I sat down with a potential new client. The individual had contacted me after attending one of my seminars and wanted me to manage his money. He came into my office and we had a nice conversation about the type of investor he is and his goals and objectives. After the conversation, much to the shock of the potential client, I told him that our firm was not the right firm for him and that he should consider using a different advisor. Needless to say, the client was somewhat shocked that I would turn down his business. As I explained to him, I didn’t want to turn down his business; however, as a professional, I know it’s important to remember not every advisor is good for every individual. I explained to him that the things he wanted to do were not within my expertise and the reason I was referring him to a different firm was because I wanted him to have the best professional advice available. It is important for people to recognize there are different types of financial advisors in the market and it’s not one size fits all.

Financial advisors or sometimes as they’re called, wealth managers, can be categorized in a number of different ways. Because I believe that professionals should be independent and work solely for the client, I believe one of the ways you should categorize an advisor is how they are compensated. Some advisors are compensated by commissions. They receive compensation in a couple different ways. First, by selling you a product. Second, by receiving additional compensation year-by-year through higher fees associated with your product in many of those commission products they provide. My problem with commission salespeople is they have dual loyalties, the client and the company’s product they represent.

In addition to the conflict of interest, the problem I have with commission products in general is that it is very difficult to know exactly what you’re paying in fees. My philosophy is when they make it difficult to know what you’re paying in fees, you know you’re paying too much.

The second type of advisor is what is known as a fee-only advisor. A fee-only advisor only receives compensation directly from you. Most fee-only advisors will either work on a set fee or a percent for money under management. These advisors receive no compensation from anyone other than their clients. One of the reasons that I am a fee-only advisor is because I want to eliminate as many conflicts of interest as possible.

The third type of advisor charges fees and at the same time accepts commissions. Sometimes these advisors will offset the commission with the fee, other times they will not. The same objections I have to the commission-only salespeople apply to these types of advisors as well. In addition, I think in many cases these advisors are double dipping on fees.

Another way that you categorize advisors is based upon their expertise. Some advisors will specialize in mutual funds, others in individual stocks. Some advisors will implement more aggressive trading strategies than others.

As far as I’m concerned, in selecting an advisor you not only have to look at how they are compensated but in addition, what their expertise is. Just like medicine where doctors can’t be a jack of all trades, the same thing applies to financial advisors. The key is just not finding a good advisor; but rather, to find a good advisor for you.

Good luck!


Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at