Finding the Right Advisor, Part 2

November 16, 2023

Last week’s column explained how to begin your search for the right financial advisor. We navigated the alphabet soup of financial credentials, highlighting three designations that are particularly worthwhile (AIF, CFP®, and CIMA). We discussed the importance of your advisor’s professional reputation, and the value of seeking references from other professionals. Finally, I encouraged you to background check your candidates using the SEC adviser disclosure website ( These steps will help you find a pool of 3 or 4 qualified candidates.

Today’s column will give you seven questions to determine the quality of each advisor in your pool. You should then be able to discern which advisor is right for you. Please note that these questions are only a starting point. As you think about them, you may realize additional questions which speak to your particular needs. Write your questions down and include them in your interview, but do not omit the questions I’m giving you.

Make an appointment with each candidate. Meet them in their office. If they can’t meet in person, scratch them from your list. You need to see their operation and meet their team. Here are the questions to ask:

  1. Tell me about your team.

Is this a solo adviser, or are they part of a larger team? Is the team responsive to your needs? Are they service-minded? Do they appear organized? Are they relaxed and happy? Remember, your financial situation is personal, and the advice you receive should be personal, too. Will these people be able to honor your trust?

  1. How do you get paid?

In the 1976 Watergate film “All the President’s Men,” Deep Throat tells Bob Woodward to “follow the money.” That’s good advice for understanding an advisor’s motivations. “Fee only” advisors receive compensation only from the clients who hire them. Others are “fee-based”, which means they receive client fees, but also get paid by companies for selling their financial products. Finally, some are “commission-based”, meaning they get paid only for the products they sell. As you listen to the candidate’s response, ask yourself: Is this person motivated to advise me, or to sell me financial products?

  1. Are you a fiduciary?

Fiduciaries are legally bound to act solely in their clients’ best interests. Not every financial advisor is a fiduciary. Non-fiduciary advisors have no obligation to give you the best recommendations—only a “suitable” recommendation. Personally, I wouldn’t want to work with an advisor who is not a fiduciary, but people do so all the time. Be careful. Get their fiduciary status in writing. You may need it if something goes wrong.

  1. What scope of services do you provide?

Some advisors are investment advisors. Others are full wealth managers. Some call themselves advisers when they are really just trying to sell products. Some advisors are also financial planners, while others have no idea what a financial plan is. Your advisor’s services should match your reasons for seeking a financial advisor in the first place. I believe financial advice is best given within a comprehensive financial plan, because the planning process helps your advisor see your whole picture.

  1. Who is your custodian?

A financial custodian is the party that safekeeps your assets on your behalf. Most banks and broker-dealers are custodians. If an advisor ever tells you that they custody assets themselves, end the interview and move on. Many frauds occur when advisors custody assets themselves.

  1. What is your investment philosophy?

Some investors want to time the market; others pursue passive investment strategies. Your candidate should be able to clearly articulate their investment approach and why it makes sense. I personally favor rigorous asset allocation based on financial planning and combine that with passively managed (i.e., indexed) portfolios. Most academic studies support this approach.

  1. What is the all-in cost of your advice?

The all-in cost of advice includes onboarding expenses, financial planning fees, investment advisory fees, and the actual cost of mutual funds or ETFs used in your portfolio. Your advisor should be able to give you a clear breakdown of all costs, even if they are only estimates, and their frequency. Note that actively managed funds are typically much more expensive than passively managed funds. The average actively-managed U.S. equity fund costs 0.66 percent per year, compared to a similar passively managed fund of only 0.05 percent per year. This is another reason why I favor passive funds.

Please see important disclosure information here.

Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey. He welcomes questions regarding investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940, or email them to