how to evaluate a financial adviser

In short

A friend of mine once told me he picked his adviser because the man had a firm handshake and a warm smile. Hold on to that story, because it is how many of us do it. If you are thinking about hiring someone to help with your money, you can do better, and you already have what it takes. Start by asking whether the person is a fiduciary, which means someone who must put your interests first. Ask how every dollar of their pay is earned, and get the answer in writing. Look the person up on the free government tools before you ever sit down. Then check the whole cost, because small percentages add up over the years. Take your time. A good adviser will not mind.

The whole of it

What it is

I once watched a neighbor spend three weekends choosing a used truck, and then spend ten minutes choosing the person who would handle his retirement savings. Most of us have done something like it. A financial adviser is someone who gives advice about money, and the title alone tells you very little. The law does not reserve the plain word adviser for a single kind of professional. Some are registered investment advisers, who answer to either the Securities and Exchange Commission or their state securities regulator. Some are brokers, who are registered with FINRA, the Financial Industry Regulatory Authority. Some hold both roles at once.

Here is why that matters to you. A registered investment adviser owes clients a fiduciary duty, meaning the adviser must act in the client's best interest. A broker who gives a recommendation to a retail customer must follow a rule called Regulation Best Interest, which the SEC adopted. The two standards are close cousins, but they are not twins. The honest way to sort it out is to ask the person directly, and a good adviser will answer plainly.

How it works

If you are holding a few business cards and wondering which one to call, here is a plain order of work. First, find out how the person gets paid. A fee only adviser is paid by the client and takes no commissions. A fee based adviser may charge fees and also earn commissions on products sold. A commission adviser is paid when a product is bought. None of these is wicked by nature. Each one simply carries a different pull on the adviser's attention, and you deserve to know which pull you are dealing with.

Second, ask for the paperwork. A registered investment adviser must give clients a disclosure document called Form ADV Part 2, which describes services, fees, and conflicts of interest. Registered firms also provide a short summary called Form CRS, or Client Relationship Summary. These are written for ordinary readers. Read them with a cup of coffee and a pencil.

Third, check the record. The SEC runs a free site called Investor.gov, with a tool for looking up advisers and brokers. FINRA runs a free tool called BrokerCheck. Both show licenses, work history, and any complaints or actions on file. It takes about ten minutes. Do it.

Fourth, ask about the credential, if there is one. Letters after a name sound grand. Some require serious study and an ethics code. Others take a weekend. Ask what the letters mean and who awards them, then check with the awarding group.

The numbers, and where to find yours

I have noticed that folks will argue over a $5 coffee and then wave off a fee they do not understand. Fees deserve the same careful eye. Many advisers charge a percentage of the money they manage, often called assets under management. Some charge a flat yearly fee. Some charge by the hour. Form ADV Part 2 lists the fee schedule, so your own number is sitting in that document.

Ask for the all in cost. That means the adviser's fee, plus the expense ratios of any funds used, plus any trading costs or account fees. An expense ratio is the yearly charge a fund takes out of your money, shown as a percent. Each fund lists its own in its prospectus, which is the fund's official disclosure paper. Add them up on one sheet of paper.

Some limits and thresholds are set by law and change by year. For example, the amount you can put into an IRA changes, and the official figure is $7,500 for 2026 (source, checked 10/4/2026). An adviser who tells you the wrong limit has handed you a warning sign for free.

A worked example

Let me tell you about a woman named Carol. She is 45, and she has $200,000 saved. She meets two advisers.

The first adviser charges 1 percent of assets each year. The funds he uses carry an average expense ratio of 0.20 percent. So Carol would pay 1 percent plus 0.20 percent, which is 1.20 percent in all. Here is the math with her numbers plugged in. 1.20 percent of $200,000 is $2,400 a year.

The second adviser charges a flat $1,500 a year. She uses low cost funds with an average expense ratio of 0.05 percent. 0.05 percent of $200,000 is $100. Add the $1,500 fee and the total is $1,600 a year.

Carol compares the two. $2,400 minus $1,600 is $800 a year. Over ten years, that is $8,000 in fees alone, before counting what that money might have earned. Now the picture gets fuller, because the cheaper adviser is not automatically the better one. The first adviser might offer tax planning, estate planning, and regular meetings. The second might only build a portfolio. So Carol writes down what she gets for each price. Fees matter. So does the work. Carol decides what she needs, then weighs the cost against it. That is sound judgment, and she did it herself.

Where it goes wrong

I once knew a man who trusted a smooth talker because the fellow sounded so sure of himself. Confidence is cheap. Trouble often starts when an adviser will not put fees in writing, or dodges the question of whether he is a fiduciary. It also starts when a person pushes you to decide fast, or promises returns that sound too good, or leans on a product that pays him a large commission. Pressure is a signal. Watch it.

Another snag is the dual hat. Some professionals are both a registered adviser and a broker, and they may switch roles from one product to the next. Ask which hat the person wears for each piece of advice. Ask it kindly. A fair adviser takes no offense at a fair question.

A quieter snag is the missing check. Many people skip the free lookup on Investor.gov and BrokerCheck because the adviser seems so decent. Decent people can still have records worth seeing. Look anyway.

And one more thing, which I say with real sympathy. Some of us never ask a question because we fear sounding foolish. You do not sound foolish. You sound like a person who guards what they have earned.

Questions to answer before you leave this page

Do you know whether the person you are considering is a fiduciary at all times, and have you asked them to say so in writing? Can you explain, in your own words, exactly how this adviser gets paid, and does any part of that pay depend on what you buy? Have you read Form ADV Part 2 and Form CRS, and did anything in them surprise you? Have you looked the person up on Investor.gov and BrokerCheck, and what did the record show? Have you added the adviser's fee, the fund expense ratios, and any other charges into one yearly dollar figure? Do you know what you would pay over ten years, and what that buys you in return? Do you understand what each credential after the name means, and who grants it? And do you feel free to ask hard questions of this person, or do you feel hurried? If the answer to that last one is no, trust that feeling and take another week.