How to Pick a Financial Adviser You Can Trust

“The people I distrust most are those who want to improve our lives but have only one course of action.” – Frank Herbert


Not all financial planners are bad. But many are bad for your wealth. Financial planners can screw things up for many reasons: Conflicted interest and just plain dumbness are the two main ones.

I’ve worked with many financial advisers in my life, but I’ve received good advice from only two of them. Syd — my surrogate Jewish grandfather (whom I’ve spoken about before) — and Steve Sjuggerud, whose advice I relate to you on a regular basis.

Recently, I have been feeling the need to hire someone new. I’m looking for someone smart and trustworthy to review my situation with regard to portfolio balance and asset allocation. I doubt I’ll learn anything I don’t know, but I might. And even if I don’t, it will have been worth the investment to know I’ve got everything properly titled and diversified.

In looking for someone to provide this service, I was forced to ask myself, “What are the qualities I need?” The answer was someone who (a) knows what he’s talking about and (b) will handle my account in an honest, frank, and ethical way.

That’s what you should be looking for too. The last time I talked about this, I recommended that you hire a fee-based professional with good recommendations. Today, I’m going to give you a list of questions you can ask to make sure that the person you have selected meets the two criteria I established above. This list comes from three sources: questions I’ve asked my own adviser, criteria suggested in a recent Time magazine article, and advice contained in the new edition of Benjamin Graham’s classic book “The Intelligent


1. “What kinds of advice do you give? Financial? Tax? Estate planning?”

2. “What are your credentials?”

3. “What is your position (president, vice president, etc.) in your company?”

4. “How do you get paid? Fee only? Commission only? Fee plus commission?”

5. “How much will I pay for your services in the first year?”

6. “What would make that number go up or down?”

7. “What is your investing philosophy?”

8. “What type of investment (stocks, bonds, mutual funds, etc.) do you recommend?”

9. “Which investment approach — technical or fundamental — do you believe is most successful?”

10. “How do you choose investments?”

11. “What is your philosophy on tax planning?”

12. “Do you consider yourself financially successful?”

13. “How do you define financial success?”

14. “How high an average annual return do you think is feasible on my investments?”

Crooked and/or useless financial planners won’t answer all those questions. They will pretend to be insulted by them or will promise to get back to you — and will then disappear.

The good guys will have answers, and some of them will have good answers.

After you’ve narrowed the field to those few good ones, ask for more. Tell them you want a financial proposal that will outline how you will earn, save, spend, borrow, and invest your money; a statement that spells out the investment philosophy that will guide his work on your behalf; and an asset-allocation plan that details how much of your wealth should be put into each of the major financial classes.

Once you have all of that, you’ll be able to make an informed, intelligent, final decision.