Have you been thinking about hiring a financial advisor? Before rushing into a decision, do your research on the four C’s.

1: Credentials

Most financial advisors have credentials after their names. Research these credentials to find out if they’re nationally recognized or if the credentials are firm-specific.

Determine how difficult it is to attain the certification and if it requires continuing education to maintain it. What you’re looking for is if this is a real certification or “fluff” to create alphabet soup.

For example, the CFP® certification is granted by the Certified Financial Planner Board of Standards, Inc. (CFP Board) and is recognized internationally. 

To attain this certification, the candidate must complete required educational classes, pass a lengthy exam, possess valid financial planning experience, and adhere to a code of ethics. This certification also requires continuing education.

2: Character

Some people have a knack for judging someone’s character. On the other hand, some people are good at hiding their true character.

When interviewing financial advisors, focus on finding someone you trust.

Learn why someone is in the business. Discuss their investment policy.

Ask questions that will help you determine if you can trust them. Find out about their personal life. Find out if they give back to the community.

It’s hard to find someone who is perfect. But you can find someone who is honest.

3: Compensation

Unless you go to a nonprofit financial planning organization, the financial advisor you talk to is for-profit – meaning they generate revenue for their firm and receive compensation.

You’ll hear terminology such as “fee-only” and “fee-based” advisors.

Fee-only advisors are compensated by charging a flat fee. If you work with them, there is also a fee from the company that holds your money.

Fee-based advisors receive compensation from the investment products you purchase.

At one time, it was perceived that fee-based advisors did not hold clients’ interests first. Due to regulations and the code of ethics from the CFP Board, most firms focus on their client’s needs first.

Many firms have a combined fee-only and fee-based model.

During my experience in the industry, I’ve met financial advisors in both segments to which I would be comfortable referring clients.

I’ve also met financial advisors in both segments to which I would not refer clients.

The key is to understand how they are compensated and if their compensation plan impacts what they advise you to do with your money.

4: Communication

For a successful relationship, communication is key. Find out if your ongoing communication will be with the financial advisor directly or if you will be interacting with their assistant or junior team member.

Understand their response rate – do they respond to emails/calls within one business day or will it take a week for them to respond to you? How will they communicate market changes? How often will they review your portfolio?

When you talk, does your financial advisor listen? Do they connect with your concerns, your needs, and your wants?

Money is personal, and you need someone who hears what you are saying. You don’t want someone who pushes their own agenda.

Before hiring a financial advisor, spend time researching the four C’s. It’s a lot of paperwork and hassle to transfer money to someone and then have to move it elsewhere.

Don’t rush your interview process. And more importantly, don’t let someone rush you into a decision.

It’s your money, and you need it to achieve the lifestyle you envision. Take your time but don’t procrastinate on a decision.

(Update to original post from April 11, 2017)


Niv Persaud, CFP®, CDFA®, RICP®, is a Managing Director at Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include developing  comprehensive financial plans, divorce financial reviews, and retirement plans. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’”