Choosing a Financial Advisor

Choosing a Financial Advisor

Choosing a financial advisor to manage your life savings should not be taken lightly. They will make the difference between financial success and trouble. In this article, we will go over how you should go about choosing the best financial advisor for your own personal needs.

Financial Advisor vs. Financial Planner

The first and most important thing to understand is that not all financial advisors or financial planners are equal. This is a fact you should take into consideration when making your choice. You should make your decision based on a combination of factors. These include:

  1. Experience
  2. Education
  3. Personality
  4. Convenience

Sadly, people often make this important decision based solely on the factor of convenience. Avoid this pitfall, do not choose your advisor based on whether he or she is family, a friend, close to home, or the first person to pitch you their services. The cloud compliance tools can help one keep hackers away.

Types of Financial Advisors

Next, you need to understand the different types of advisors.

  1. Insurance Agent
  2. Broker
  3. Investment Advisor

1. Insurance Agents

Insurance agents are individuals that sell insurance products. This could include life insurance, annuities, disability insurance, long-term care insurance, and health insurance.

Pros of using an Insurance Agents

Since all they sell are insurance products, an experienced insurance agent should be knowledgeable and helpful when it comes to selecting insurance products and solutions. Be sure that if you are in the market for insurance you select an agent who specializes in the type of insurance you need.

Cons of using an Insurance Agent

Although they may understand insurance products, an insurance agent generally fails to be a good advisor. This is because their knowledge base is limited to insurance products. It should not surprise you that when working with such an individual you will find their solutions will be insurance products. They will generally advise you to transfers all or a large portion of your retirement assets and other savings into an annuity and/or life insurance.

Summary of using an Insurance Agent

Insurance agents certainly serve a purpose, and that is to fulfill the specific need for insurance. We would advise against using an insurance agent for the use of any type of planning, or financial analysis, as they are neither equipped with solutions nor experienced in such complex matters.

2. Stock Broker

A stockbroker is an individual that sells securities for a commission. In short, they are “order takers”. This means they do not have discretionary control; they must have the client’s consent for each transaction. Often, brokers are insurance agents as well, allowing them to sell annuities or life insurance.

Pros of using a Stock Broker

Stockbrokers have been common for decades. They are great if you simply want to purchase a security or need information regarding risk. They are generally less expensive than alternatives if the investor has less than $50,000 to invest.

Cons of using a Stock Broker

Since brokers work off commissions, they are not financially vested in their client’s accounts. Since they are not fiduciaries, they are not legally obligated to put their client’s interests ahead of their own.

In fact, Warren Buffet said this regarding stockbrokers:

“The broker is not your friend. He’s more like a doctor who charges patients on how often they change medicines. And he gets paid far more for the stuff the house is promoting than the stuff that will make you better.”

You may not spot a broker as easily as you may think. They work for big companies like MetLife, Ameriprise, USAA, Fidelity, Charles Schwab, Merrill Lynch, and Edward Jones, to name a few. You can also find brokers work at your local bank’s branches.

Summary of using a Stock Broker

A stockbroker may make sense for you if you have less than $50,000 to invest, or possibly if you are looking to purchase a security and holding it for an extended period of time, keep in mind that every time a broker changes your positions, sells or buys, a commission is charged to your account.

3. Investment Advisor

A Registered Investment Advisor is an individual that manages money for a fee. This fee is usually a small percentage based on the assets they manage for you. An investment advisor acts as a fiduciary. This means they must put the interests of their clients ahead of their own.

Pros of using an Investment Advisor

Since an investment advisor acts as a fiduciary, you can be sure that your financial advisor is watching out for you. They cannot accept commissions for transactions. Because they are paid a percentage of the assets they manage; they have a vested interest in the performance of your accounts.

Arthur Levitt, the former SEC chairman said this about investment advisors:

“If you have more than $50,000 to invest, you should fire your broker and find an investment advisor. Brokerage firms would like you to think they perform the same functions as investment advisors.”

Cons of using an Investment Advisor

If you have less than $50,000 to invest you may find it hard to engage with an investment advisor that will work with you. If you are not looking for advice or financial planning and want to decide what you invest in, a broker or online broker may be a better choice for you.

Summary of using an Investment Advisor

If you have over $50,000 to invest, you are looking for guidance, and you want your advisor to be legally and ethically obligated to place your interests ahead of their own, an independent investment advisor may be right for you.


Once you have determined the best type of advisor for your needs, it’s important you do your due diligence to investigate them. Learn about their background, their education, and any discipline they may have had. Go online and read reviews, look through their website, and check the Better Business Bureau. You will also want to learn about any professional designations they may hold. However, be precautious, there are many misleading designations that give the appearance of education. We recommend you find an advisor with a CFP -Certified Financial Planner or a ChFC-Chartered Financial Consultant designation.

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Broker Check ( – allows you to review the background of any Stock Broker or Investment Advisor.

Better Business Bureau ( – Review if they are accredited, and what their BBB rating is.

Certified Financial Planning Board ( – Ensure your advisor is a Certified Financial Planner, review any discipline.