Can You Trust Your Financial Advisor? Here’s What You Need To Consider

A financial advisor is a licensed investment professional who helps individuals manage their personal finances. They provide tailored advice on investment strategies, retirement planning, budgeting, and other financial matters. For investors, especially those navigating complex situations or working toward long-term goals, advisors can offer invaluable expertise and customized approaches to help achieve financial success. 

A good financial advisor is trustworthy, transparent, knowledgeable, and attentive to clients’ needs and circumstances. Financial advisors can also be a welcome addition for those investing with robo-advisors, like SoFi Invest and Merrill Guided Investing, bringing in nuanced insights and a personal touch.

The Responsibility of a Financial Advisor

Financial advisors help you make smart decisions with your money and achieve long-term financial goals, such as saving for retirement, navigating investments, budgeting, or planning for big life events, like buying a home or paying for college. They take a comprehensive look at your financial picture and help create a strategy tailored to your goals and needs. Many financial advisors are fiduciaries, meaning they’re legally obligated to put your interests first.

Working with a good advisor can take a lot of stress off your plate. They keep an eye on the markets, adjust your plan as needed, and help you stay on track no matter what life throws your way. Whether you're just getting started or nearing retirement, the expertise of a financial advisor can bring you peace of mind and confidence in your financial future.

Signs of a Trustworthy Financial Advisor

Transparent

Transparency and authenticity are essential in a financial advisor-client relationship because they build trust and confidence. A trustworthy advisor clearly lays out their fees, shares an honest account of their performance, and has a verifiable track record. When there's nothing hidden, clients can make confident choices and feel at ease about their investments.

Qualified

Financial advisors aren’t legally obliged to have a minimum level of secondary education, though many do have at least a four-year degree in finance, business, or a related field. There are certain qualifications and licenses financial advisors must have, such as a Series 6, 7, 63, or 65, depending on the services they offer. Additionally, credentials such as CFP (Certified Financial Planner) or ChFC (Chartered Financial Consultant), while not a legal requirement, help establish credibility and demonstrate expertise.

Professional

Professional financial advisors serve their clients with genuine respect, listen carefully to their needs and goals, and proactively communicate about market changes or strategy shifts. Setting clear expectations upfront builds additional trust and ensures both parties are on the same page.

Empathetic

Empathy is typically not a word associated with logic- and facts-based professions, but an empathetic financial advisor—one who shows the desire and skill to understand a client’s feelings regarding their financial circumstances—is quite important. Being patient, understanding, and responsive demonstrates to clients that they’re truly heard and supported in reaching their financial goals.

Fiduciary

A fiduciary is someone who’s legally and ethically required to put your best interests first. When a financial advisor is a fiduciary, it means they must recommend what’s truly best for you, not what will earn them a bigger commission. Not all financial advisors are fiduciaries, and ensuring that yours is can save you a lot of headaches and, potentially, money. 

Red Flags of a Financial Advisor

Not Aligned With Your Financial Needs

A financial advisor must be aligned with your financial goals. They should listen to you carefully and be considerate of your circumstances. For example, if your investments are handled too aggressively, especially near retirement, you might suffer losses that you can't recover before needing the funds. If an advisor is overly aggressive in pushing complicated or unnecessary financial products, it may signal that they prioritize their commission over your future. Pay close attention and speak up if you feel your needs are being overlooked. 

Confusing or High Fee Structure 

Financial advisors must have a transparent and reasonable fee structure. If their costs seem high, they can’t explain how they’re paid, or fees aren’t clearly outlined, those are serious red flags. Advisors may charge in various ways—via flat fees, hourly rates, a percentage of your assets, or commissions—and it’s essential to understand how and what you’re paying for. No investor needs their nest egg chipped away by unnecessary or hidden fees.

Poor Communication

Good communication is key in any professional relationship, and that’s especially true in financial matters. You should feel informed, supported, and confident about where your money is going and how your goals are progressing. If your advisor is hard to reach, slow to respond, or fails to give you regular updates, it can lead to frustration and confusion—feelings you should never have about your personal finances. A lack of communication is not just an inconvenience, but a massive red flag that your advisor may not be prioritizing your needs.

Financial Advisors Can Help Robo-Advisors

Robo-advisors have grown in popularity in recent years, as the best of them combine convenience, automation, and low costs. Some investors, however, may benefit from adding a human financial advisor to the mix. A personal advisor can offer customized guidance outside of a robo-advisor’s parameters, address complex situations, and provide emotional comfort during volatile markets. It can be a powerful combination, ensuring both efficient portfolio management and personalized financial planning.

The Bottom Line

Choosing the right financial advisor is about trust, transparency, and feeling confident in your financial future. The best advisors are upfront about their qualifications and fees, communicate clearly and consistently, and always put your goals first—not their commissions. Keep an eye out for red flags such as unclear pricing, poor communication, unrealistic promises, or poor alignment with your financial goals. A good advisor will take the time to understand your needs, act in your best interest, and help you build a financial plan you feel good about. Your financial future is too important to leave in the hands of someone you can’t fully trust.