8 Traits to Look for When Choosing a Financial Advisor

Working with a financial advisor can make it easier to clarify your financial goals and develop a plan for reaching them. But what makes a good financial advisor? There are certain traits and characteristics that successful financial advisors share, from experience and professionalism to transparency and adaptability. Knowing what to look for can help you find the right advisor to work with. Once you’ve connected with a financial advisor, you can begin mapping out a strategy for building wealth.

What Does a Financial Advisor Do?

Financial advisors help their clients create a plan for reaching their financial goals. Specific tasks that advisors can help with include budgeting, debt repayment, retirement planning and college savings. Some advisors offer advice to a variety of clients from different backgrounds, while others focus on serving a specific type of client.

A financial advisor may hold different certifications, which can attest to their knowledge, skills and experience. A Certified Financial Planner™ (CFP®), for example, can provide broad financial planning advice. A registered investment advisor (RIA), on the other hand, is primarily concerned with offering advice about investments.

Financial advisors can work for large wealth management firms, insurance companies or brokerages. They can also operate independently, running their own boutique businesses. In exchange for their services, financial advisors are paid a fee, typically around 1% of assets managed per year.

Some advisors are fee-only, meaning they only charge fees for the services they provide. Others are fee-based, meaning they collect fees based on the products or services they recommend. Either type of financial advisor may be a fiduciary, meaning that they’re obligated to act in the best interests of their clients at all times.

What Makes a Good Financial Advisor?

If you’re new to working with a financial advisor, certain traits can help you spot a good one.

If you’ve never worked with a financial advisor before, you may not know what to look for when choosing one. There are some clues that can make it easier to separate the good from the bad. Here are nine traits to consider in your search for a financial advisor:

1. Experience and knowledge: If you’re working with a financial advisor, it’s likely because you’re relying on their expertise to help you create a workable plan for managing your money. An advisor who’s experienced and knowledgeable is in a better position to formulate a strategy that’s tailored to your needs and objectives.

Asking an advisor what certifications they hold and how long they’ve been in business can give you insight into their background. You can also use a tool like FINRA BrokerCheck to research an advisor’s credentials and history.

2. Transparency: Transparency is an important trait for a financial advisor to have, particularly when it comes to what fees they charge and how they’re paid. It can be easier to trust an advisor who’s open about their fee structure and isn’t reluctant to answer your questions about how their business operates.

If you’re asking basic questions about fees, communication style or an advisor’s track record and are met with murky answers—or none at all—that’s a sign that you may want to look elsewhere for advice.

3. Good communication: A good financial advisor prioritizes communication with their clients. When vetting advisors, it’s helpful to ask how often you can expect them to get in touch, what their preferred methods of communication are and who you can go to with questions if they’re unavailable.

Your advisor should be able to answer all of your questions thoroughly and return communications within a reasonable time frame. If you’re waiting weeks for a response to a call or an email, that’s a sign your advisor may not value good communication.

4. Holistic planning: Every advisor has a different style but it’s important to choose one who looks at your financial situation holistically. A good advisor takes time to get to know you and your needs in order to create a comprehensive financial plan for your money. Rather than immediately recommending that you do X, Y or Z, they’ll first take an in-depth look at your income, assets, debts and goals so that any advice they offer is specific to you.

5. Professionalism: Professionalism is a must when working with a financial advisor because you’re counting on them to guide you. Hallmarks of a professional advisor include dressing the part, assuming a friendly but courteous demeanor, returning calls or emails in a timely manner and being respectful of who you are as a person.

You may also want to look for an advisor who is a fiduciary for your peace of mind. Fiduciary advisors are held to a higher ethical standard with regard to how they advise their clients. If you’re unsure whether or not an advisor is a fiduciary, you can ask them directly and then verify their status through BrokerCheck.

6. Personality: Advisors are more than just the products they recommend or the services they offer. There has to be some personality there as well; otherwise, you might find financial planning so boring that you don’t even bother to do it. It’s also important for an advisor’s personality to mesh well with yours.

If you’re an introvert, for example, you may find dealing with an extremely extroverted advisor difficult. Extroverts, on the other hand, may find an introverted advisor too reserved for their tastes.

7. Reputation: The best financial advisors let their reputation do the talking for them. Instead of spending lots of time on marketing and trying to attract clients, they have clients coming to them thanks to referrals and word of mouth.

A simple way to gauge an advisor’s reputation is to ask. If you have friends or family members who work with an advisor, ask them what they like or don’t like about them. Reading online reviews is another way to see what people have to say about an advisor.

8. People first approach: Good financial advisors know that it’s people, not profits, that matter most. An advisor who’s tuned in to your needs is focused on finding the right solutions, rather than simply pushing one product versus another. These are the advisors who are able to build trust with clients—an important element to have when you’re asking someone to guide you financially.

9. Adaptability: A good financial advisor can adjust their strategies as your life and the markets change. Your needs at age 30 will look very different from your needs at age 60, and an advisor should be able to update your plan to reflect those shifts. The same is true when markets fluctuate, tax laws change or new opportunities arise. An adaptable advisor won’t stick rigidly to a one-size-fits-all strategy but will help you pivot so your plan stays aligned with your financial goals.

Questions to Ask Before Hiring a Financial Advisor

Knowing what traits make a good financial advisor is helpful, but you also need a way to evaluate them in practice. Preparing a clear set of questions before you sit down with an advisor can make the process easier and help you spot red flags.

Asking about background and experience is a good place to start. Find out how long they have worked in the industry, what designations they hold and what type of clients they typically serve. This will give you a sense of whether their experience matches your needs.

Fees are another key point to raise. Ask whether the advisor is fee-only or fee-based and how their compensation is structured. Some advisors charge a flat fee, others bill on an hourly basis and many charge a percentage of assets under management. Make sure you understand exactly how they get paid and what services are covered under their fee. This can help you avoid unpleasant surprises later.

It’s also important to learn about an advisor’s investment style. Ask them how they make investment decisions, whether they favor active or passive management and how they tailor portfolios to different client goals. The way an advisor talks about risk and return can tell you a lot about whether their approach lines up with your comfort level and time horizon.

Communication is another area to cover. Ask how often you can expect updates, what kind of reporting they provide and whether you’ll have direct access to them or to a support team. Consistent communication is key to building trust, so it helps to know upfront what to expect.

Finally, ask if they act as a fiduciary. Advisors who are fiduciaries are legally obligated to put your best interests ahead of their own. Having that commitment in writing gives you added protection as a client. Confirming their answer with your own research using tools like FINRA BrokerCheck can verify that the advisor is both qualified and trustworthy.

Bottom Line

A good financial advisor has many important traits, and finding the right one can take time.

What makes a good financial advisor? It isn’t just one thing; instead, there are numerous traits that a good financial advisor can possess. Choosing an advisor to work with can take time, but it can be worth the wait to find one that checks off all of the boxes listed above.

Financial Planning Tips

If you’re meeting with a financial advisor for the first time, it helps to have a go-to list of questions prepared. For example, you can ask them about their background and credentials, their fee structure, their investment style and the type of clients they typically work with. Finding a financial advisor also doesn’t need to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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