Three Steps to Choosing a Financial Advisor

by Frank Muller

You can follow us at

Just click the show button and subscribe or unsubscribe at your pleasure. You can also listen to us on our podcast “Is it right or is it easy” on iTunes, Spotify, Amazon Music and other podcasting platforms.

Investment News published an article that touts the SEC approval of a FINRA rule that grants investors access to the FINRA database in order to perform “background checks” on prospective financial advisors. On the surface, this public service certainly makes sense and I see no reason for a reputable advisor to fear this. What I hope is not lost on investors, however, is that this is just the first step in a larger process of evaluating those you would trust for sound financial advice that places the interest of the client over the interest of the advisor and/or their Firm.

Often in abstract life, we’re able to employ binary decision making: “Is it right or wrong—simple or difficult?” In the real world, many decisions are not that simple. Effective decision making is about establishing a process by which facts are collected and then framing the right questions to ascertain which decision is best.

This is the first step, and it is why the “easy” path is not the one the wise travel. They tend to choose the path, which is more difficult for it requires deep thought, analysis, prayer, fact checking, referral validations, verifying credentials, patience and many other rocks and pebbles on the road to wisdom.

When we seek to hire any professional—a lawyer, a doctor, an engineer or an architect—we struggle to know what questions we should be asking. It’s a classic example of we don’t know what we don’t know. Sure, it’s great to check the Internet for instances of malfeasance or malpractice in their backgrounds. However, there are thousands of financial advisors whose backgrounds raise no concerns. Does that mean they are right to provide us with financial counsel?

The way I see it, the second step is finding a sherpa to guide us. We should engage an expert in the field we are searching—in this case, financial planning—to learn what we should be searching for and which questions we should be asking. It’s like asking one doctor to tell us what questions we should be asking another doctor. Getting an expert to frame the criteria by which we evaluate a professional also helps us understand the facts necessary for reaching a valid conclusion.

In addition, seek the advice of a sherpa from people other than close friends and family members. This is important for two reasons notably. One, we should not hire whom we cannot fire. Seeking the advice of a truly dispassionate professional who knows there is nothing in it for them helps us get closer to the Truth. Secondly, when we approach people with whom we know only by prestige and reputation we do so with our intellect freed from personal attachment and bias and their self-interest set aside for charity and good will. We can then begin to hear Truth, not seek truth that conforms to our emotional feelings.

Sherpas tend to self-select because if they do not see self-interest and turn us away, we already know they were not to be trusted any way. Good and upright people seek to help others and are especially keen to point people in the right direction. A good sherpa will know they may not get us for a client, but they have dramatically increased their odds they get a referral from of all people a non-client. This is a sherpa who is truly wise.

Getting the questions right is half the battle, and well worth the cost.

The third step in evaluating the suitability of an advisor is to frame the questions to prospective advisors in a manner that reveals the information they will need to give effective counsel. An advisor may be brilliant in one area, but it may not be the area where we need advanced expertise. Knowing the right criteria to consider helps us understand which facts are the most essential in determining whether an advisor is the right fit for our goals.

This is sitting and pondering deeply precisely the kind of virtuous person we are searching for and exactly the skills they need to bring to the table to meet our needs.

FINRA is starting an appropriate conversation by providing this elementary tool, but we can offer our clients and prospects a far superior service. We can perform these background checks ourselves and disclose more than the law requires, outline the proper questions to ask any financial advisor and showcase all the information that clients must provide in order for any qualified advisor to render good advice. This places us as advisors in the role of both a “sherpa” to guide those with whom we have no self-interest and also aligns our practice with the achievement of our client goals more so than our own.

As reputable advisors, this government-led solution provides a great opportunity for us to demonstrate to our social circles what a true professional does. This level of transparency is an ally—not something to fear.

May Peace be with us all.

Success! You're on the list.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s