6 Tricks to Identify a Trustworthy Financial Advisor

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Financial advisors help clients plan for their short and long-term financial goals. So, if your goal is to buy your dream home, pay for your children’s education, plan for taxes, or plan for a peaceful retirement life, financial advisors are the experts that you should be looking for.

However, finding the right advisor is a crucial decision since they are handling your income and savings. You will always want a reliable advisor that can offer objective advice for your specific investment needs. Furthermore, if you’re going to have a qualified professional who has a vast experience dealing with your type of situation, it is essential that you find a trustworthy individual.

Consider the following tricks to identify a credible advisor: 

1.) Do a Background and Experience Check

Finding out how your advisor has carried out his work over the past several years can help you know if his strategies and risk tolerances fit well with yours.

Here you want to know that your prospective advisor already has several years of experience under his belt and has worked through market ups and downs.

2.) Inquire About Compensation

Understanding how your advisor will be paid will allow you to compare him with others that you may interview. Remember that financial advisors are compensated in three ways:

  • Fee-only: These types of advisors will charge you an annual or hourly fee for the suggested advice
  • Commission-only: These types of advisors will not charge you a fee, instead they will receive income from the products they sell
  • Fee/commission: These advisors charge a smaller fee for their services and collect commission from the products they sell In a nutshell, you typically want to avoid commission-based advisors as they may try to push a specific plan if they’re getting a cut of that revenue. If you are just starting out your investment, then an advisor who charges by the hour could be the best fit. These advisors are best when your needs are relatively simple. Such advisors usually take care of your finances in the right way.

3.) Know his Investment Philosophy

Asking the advisor about his investment philosophy is the right thing to do even if you are not sure of your own investment strategies and philosophies. Your potential advisor should be able to explain what he considers to be important while making an investment decision. Based on his answer, you will either find yourself nodding your head or thinking it’s time to move on to another candidate. If the answer is unclear to you, ask for clarification.

4.) Understand his Area of Expertise

You will find that some advisors are more efficient for giving investment advice to young investors who want to build their nest-egg. Others may be more active in helping clients in retirement planning. For a person who will be retiring soon, an advisor  who is more focused toward assisting young professionals will not be an ideal match. This is just like going to a dentist for a broken wrist. So, identify the financial advisor who specialises in your needs.

5.) Ask Him to Show some Sample Portfolios

Looking at the sample portfolios, you will understand how your advisor will recommend you the asset allocation and handle volatility. If your advisor hesitates to give you the samples and instead tries to reassure you that all his portfolios are balanced ones, it’s better to give him a pass. Remember that a trustworthy financial advisor will proudly present you his sample portfolios without flinching for a second.

6.) Ask for References

Try to get a list of recent clients who he has counselled for at least two years. It is better to contact these clients and ask them about their satisfaction with the financial services and their personal view of the advisor. Also, ask them about their investment returns from being associated with that advisor.


In the end, advisors should promise you good advice across a range of issues, not just investments. He must be the one who considers your risk appetite and time horizon instead of just bragging about his ability to help you achieve your goals.

Make sure that while hiring, you review your decision maximum times, as hiring an advisor is not the same thing as hiring a plumber. At the end of the day, your advisor will be the person you turn for financial guidance through various stages of your life.


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