So, you have decided that you need to hire a financial advisor.  You have been a do-it-yourself financial planner for years and the results have been inconsistent, at best.  But how do you find an advisor? Should you hire a fee-only fiduciary advisor or someone else? If you search for direction on the internet, you will find many results.  Some will actually be helpful.  Unfortunately, many will not.

We have been in the financial services industry for over 30 years, and we have served clients in a variety of contexts, including in a bank, in an insurance company and in a broker dealer.  It took some hard lessons, but we eventually realized that people are best served by fee-only fiduciary advisors.  Let us explain why.

Let’s start by identifying the various kinds of financial advisors and how they are regulated.

Types of Advisors

Insurance agent:

Insurance products are generally regulated by state insurance departments.  An insurance agent is licensed by a state to sell insurance products in that state.

Registered Representative:

Securities products are generally regulated by the federal government through Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC).  A registered representative is registered with a broker-dealer (BD) to sell securities products.  The broker-dealer, in turn, registers with states and the SEC.

Investment Advisor Representative:

Investments are regulated by both the states and the SEC.  An investment advisor representative affiliates with a Registered Investment Advisor (RIA) to manage investments.

Methods of Compensation

Now let’s consider the methods compensation for financial advisors:


Financial products are generally sold by sales people who are paid a commission by the company that created the products.  Most insurance products, including health insurance, disability insurance, life insurance, long term care insurance, and annuities are sold by insurance agents.  Many investments, including stocks, bonds, mutual funds, limited partnerships, and real estate investment trusts (REITs) are sold by registered representatives who are compensated by their broker-dealer.


Advisors who do not sell financial products (RIAs) and who, therefore, are not compensated by commissions, charge fees instead.  Advisors earn fees for a variety of services, including financial planning and investment management.  Fees can be hourly, flat/fixed or related to the amount of the assets under management, net worth, and in a variety of other ways.


Some advisors are licensed to both sell financial products and to charge fees.  These advisors often refer to themselves as “fee-based.”  This term has become problematic, as it is confusing to the public.  As a result, state and federal regulators are exploring ways to require advisors to be clearer when they describe how they are compensated.

Now let’s describe the standards of care that exist between an advisor and the customer/client.

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Standards of Care


Registered representatives of broker-dealers are held to a ‘suitability” standard of care by FINRA.  The suitability standard “requires that a firm or associated person have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer.”


RIA firms and their (investment advisor) representatives are held to a fiduciary standard of care by the SEC under the 1940 Investment Advisers Act.  This means that “advisors have a fundamental obligation to act in the best interests of their clients and to provide investment advice in their clients’ best interests. Advisors owe your clients a duty of undivided loyalty and utmost good faith.  Advisors should not engage in any activity in conflict with the interest of any client.”

A careful reading of these two standards indicates that the higher standard is the fiduciary standard.

Now, back to our original question:

What are the advantages of hiring a fee-only fiduciary advisor?


A fee-only advisor will not sell financial products and will only charge fees.  Fees must be fully disclosed in advance in a document called Form ADV.  Advisors following best practices will also provide written engagement letters to prospective clients in which fees are clearly stated.  Consumers of financial products often do not know the true nature of the compensation that is built into the products they are sold.

Conflicts of Interest

Advisors selling financial products (i.e. insurance and investments) are confronted with conflicts of interest that are often difficult to navigate.  Insurance companies, for example, typically provide varying levels of compensation (i.e. commission, bonuses, and other financial incentives) for the sale of their products.  This makes it very difficult for the agent/advisor to set aside personal interest and sell the product that is best for the customer.

Fee-only fiduciary advisors have few conflicts of interest.  They can occur.  However, fee-only fiduciary advisors are bound by a legal duty to act in your best interest.

Now that we have established that most people are best-served by working with a fee-only fiduciary advisor, what are the other criteria you should consider as you look for an advisor?


Financial advisors can carry many professional credentials.  Candidly, many of them lack substance and credibility.  The gold standards are Certified Financial Planner™ (CFP®) and Chartered Financial Analyst (CFA).  Look for a fee-only fiduciary advisor with one of these credentials.


Financial advisors are generally more effective at serving clients the longer they have been in the industry. You should look for a fee-only fiduciary advisor who has served many clients and who has been through multiple economic and stock market cycles.

Skilled and Specialized

Financial advisors tend to specialize in areas such as retirement planning, insurance, college planning, etc.  Hire a fee-only fiduciary advisor who has the knowledge and skills to address your particular needs and interests.

Where to find a fee-only fiduciary advisor

You can find qualified advisors in the following organizations:

The National Association of Personal Financial Advisors (NAPFA)

Garrett Planning Network

XY Planning Network

Alliance of Comprehensive Planners

Our final suggestion is to find an advisor with whom you feel comfortable.  Identify and interview several qualified advisors who you think might be a good fit.  Then select the fee-only fiduciary advisor who you trust, as you would a good friend.