#199: How to Vet a Financial Advisor
In this episode, Josh and Amelie discuss the confusing world of financial advisors and give listeners ideas for evaluating a potential advisor. The hosts explain why job titles are meaningless and certifications vary widely in rigor, with the Certified Financial Planner® (CFP®) standing out as the gold standard. They clarify how the fiduciary standard works, including why just the Series 65–only advisors are legally bound to act in a client’s best interest at all times. The conversation then walks through how to use BrokerCheck and Form ADV to uncover an advisor’s licenses, conflicts of interest, fees, custody arrangements, and more. Together, these tools may help consumers find the right advisor for their needs.
Top takeaways:
- Job Titles Are Meaningless: Vice president, wealth manager, and similar titles are unregulated and don’t indicate competence or ethics.
- Certifications Vary Widely
- Over 400 financial certifications exist; many require little more than paying a fee.
- The CFP® is the gold standard for personal financial planning due to its rigorous exam, education requirements, enforced code of ethics, and continuing‑education requirements.
- BrokerCheck Is Your First Stop (https://brokercheck.finra.org/)
- Every licensed advisor remains in the system permanently.
- If an “investment professional” isn’t listed, they’re either an insurance agent or they’re operating illegally.
- Review disclosures carefully; multiple complaints or hidden details are red flags.
- Fiduciary Status Is Critical
- Only advisors with a Series 65 license (look for “IA” in BrokerCheck) and no other licenses are legally bound to act in the client’s best interest at all times.
- Advisors with multiple licenses (e.g., IA and broker) can switch roles—and obligations—mid‑conversation (and without telling you they switched roles).
- Commissions Influence Advice
- Academic studies show that advisors recommend products with higher commissions.
- Brokers and insurance agents are legally obligated to act in the best interest of their firms, not their clients.
- Form ADV Part 2 Shares Key Information About the Advisor
- Required for all registered Investment Advisers (IAs).
- Includes services, fee schedule, conflicts of interest, investment philosophy, and custody details (who is the custodian of your money).
- Good advisors make their ADV and fee schedule easy to find.
- Custody Protects You
- Look for advisors who use large, third‑party custodians who will protect you (not the firm).
- Small custodians can be vulnerable to conflicts of interest, as seen in the Bernie Madoff case.
- Transparency Is Important
- Advisors who openly share fees, conflicts of interest, and regulatory documents demonstrate integrity.
- Marketing transparency often reflects operational transparency.
- One Advisor Profile to Look For (in our opinion)
- Series 65 license only (legal fiduciary duty)
- CFP® designation (rigorous training and ethics)
- Clear, accessible disclosures and fee transparency
- Uses a large, reputable third‑party custodian
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