Investment Advisors – What To Look For And How To Find A Good One

Finding a trusted investment advisor is like dating. It takes time, effort, and a lot of discernment. After all, building a relationship with an investment advisor who knows your investment needs and financial goals allows someone a peek into an intimate part of your life. If you choose, that person could be in your life for years.

If you’re not looking for a human advisor, one of the best robo-advisors gives you access to smart investment management at a lower overall cost. Either way, you should spend some time scrutinizing potential candidates and seeing how they fit your needs.

To help you find them, here’s a guide that walks you through the different types of financial advisors, your top priorities, and the resources to find them.

Due to their fiduciary duty, registered investment advisor (RIA) firms (legal entities registered to provide investment services) are one of the largest segments in wealth management, worth $128 trillion by 2021, according to ThinkAdvisor. of assets under management (AUM).

Key industry statistics:

  • RIA’s assets under management have increased in 18 of the last 21 years.
  • 93% of total assets were managed by RIA with over $5 billion in AUM in 2021.
  • 88% of Investment Advisory Agencies (IARs) (those who work for investment management firms) worked for smaller companies with 50 or fewer employees.
  • 88% of independent IARs had AUM less than $5 billion.
  • By 2021, nearly 92% of assets were managed at the discretion of advisors on behalf of clients.
  • 2021 will see a record increase in the number of clients working with IAR, reaching 64.7 million.
  • Together, 15,000 SEC-registered RIA firms will employ more than 928,000 non-administrative employees in 2021.
  • In 2022, 35% of Americans said they worked with a financial advisor and 57% said they were handling their investments, but the rest were unsure.
  • 25% of Americans say they have no one to turn to for financial advice.
  • 60% of non-retirees believe their retirement savings are “off track.”
  • 75% of American teens lack confidence in their financial savvy.

Source: ThinkAdvisor,, and Statista

Whether you’re building an investment portfolio, planning for retirement, saving for college, or buying a home, partnering with an investment advisor has many benefits.

Although the terms financial advisor and investment advisor are often used interchangeably, there are important differences between the two.

For example, the Securities and Exchange Commission (SEC) has outlined rules for investment advisers to protect their investors. This includes our fiduciary responsibility to our customers. Fiduciary duty means that an advisor must act in the client’s best interests, including exercising honesty, loyalty, confidentiality, prudence, and other qualities.

Financial advisors (often referring to various investment professionals, especially money managers, stockbrokers, insurance agents, etc.) are less rigorous than investment advisors, who must put their clients’ best interests first. not.

Essentially, these kinds of financial advisors are able to make “good” recommendations to their clients. These recommendations may be good, but they may or may not be the best for your client’s situation. includes government agencies that regulate

For example, investment advisors often operate on a fixed-fee-based model, charging a fixed percentage regardless of the amount invested. According to AdvisoryHQ research, the average annual fee in 2021 will be 1.12% on his $100,000 AUM, equivalent to $1,120 a year. Their incentive is to increase your money, so the fees they receive will increase accordingly. For example, 1.12% of $300,000 equals a fee of $3,360.

Financial advisors, such as broker-dealers, on the other hand, may sell products such as annuities and life insurance for a commission. However, other financial advisors may work on a fee-only model, where he receives an hourly fee for the work performed.

In addition to providing customized investment advice, investment advisors can wear multiple hats and, with the proper licenses, can offer a combination of financial planning, portfolio management and even trading services. . As such, knowing what they offer and the associated fees is essential.

Common positions for investment advisors include:

  • Asset manager: Wealth managers choose investments such as stocks, real estate, and commodities by learning about their long-term financial goals and risk tolerance. They often offer a wide range of non-stock investments.
  • Portfolio Manager: Focused primarily on equities and fixed income, our portfolio managers specialize in market areas such as consumer discretionary stocks and buying and selling holdings as investment opportunities arise.
  • Asset manager: Serving high net worth individuals and families, Wealth Managers have a dedicated team of financial experts covering all aspects of investment advisory services.
  • Financial Planner: Financial planners focus on personal and financial well-being by providing advice on budgeting, maximizing employer profits, retirement savings, choosing insurance coverage, and more.

Regardless of title, the SEC regulates investment advisors with more than $110 million in assets under management, while state regulators oversee advisors with up to $100 million in assets. Advisors between these amounts may register with the SEC, but are not obligated to do so.

Consider your financial needs and objectives as well as your area of ​​expertise and qualifications when choosing an investment advisor.

For example, to earn the Certified Financial Planner (CFP) certification, financial planners must meet extensive training and experience requirements and pass tests. Beyond choosing investments, CFP takes a more holistic approach to managing its overall financial situation.

Other designations such as Certified Trust and Fiduciary Advisors (CTFA), Chartered Life Underwriters (CLU), and Financial Risk Managers (FRM) prepare financial advisors in a variety of areas.

One of the benefits of working with a large investment advisory firm is that you likely have access to multiple teams of experts with varying experience and qualifications. Smaller investment advisory boutiques, on the other hand, tend to offer a more personalized service.

Due diligence is important regardless of the size of your company. From reviewing fee structures to assessing value, trust is one of the key factors when choosing an investment advisor. So don’t hesitate to ask for referrals, review performance data, ask for suggestions, or ask questions like:

  • What is your investment philosophy?
  • Should I expect any other fees besides a fixed rate or percentage of assets?
  • What kind of clients do you mainly work with?
  • How often can I expect updates about my investment?
  • Besides investments, do you offer real estate and tax planning strategies?

Ultimately, you want to feel good about trusting someone with your money, so take the time to listen and learn. And don’t underestimate the value of regularly reviewing your investments to stay engaged. You need to understand the incentives of the advisors you work with and their legal obligations to you. Here’s how to choose the right advisor.

When looking for investment advisors, consider organizations such as the Financial Planning Association, the National Association of Personal Financial Advisors, or the CFP Board where you can search for candidates. Use these free resources to explore advisor specialties, certifications, minimum investment requirements, and associated fees.

Additionally, larger financial companies such as Fidelity and Charles Schwab offer wealth management services, but have much higher minimum investment requirements.

Other companies such as Wealthfront and Betterment that use automated investment options with robo-advisors have no minimum investment requirements. Additionally, the fees are minimal compared to using human advisors.

And for the do-it-yourself investor, there are plenty of resources that offer free financial advice.


Scaling your investment can be complicated without the time, knowledge, or resources. By partnering with an investment advisor who caters to your financial needs, you can delegate the work to an expert and instead focus on what you really want to do.

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