Let’s be honest—choosing a financial advisor can feel a little like choosing a mechanic when you don’t know a carburetor from a calzone. Everyone says they’re trustworthy, but how do you know you’re not about to pay too much for a lube job you didn’t need?
So here’s the question I hear (and totally understand):
“Should my advisor be licensed? Do they need a bunch of letters after their name? Or is ‘good vibes’ enough?”
Let’s break it down into bite-sized pieces, without the jargon.
1. Yes, They Should Be Licensed.
Would you take medical advice from someone who “just really likes bones”? No. Your financial advisor should be registered with the SEC or a state regulator and hold the appropriate licenses for the advice or products they offer.
For example:
- Series 7: For buying/selling securities (stocks, bonds, etc.)
- Series 66 or 65: For providing investment advice
If they’re not licensed, run. Or at least walk away briskly.
2. Look for Meaningful Designations
Not all alphabet soup is created equal. Some designations are like honorary PhDs from sketchy online schools. But a few really do show commitment and expertise.
- CFP® (Certified Financial Planner) – This is the gold standard for financial planning. It requires rigorous education, exams, ethics, and experience.
- CFA® (Chartered Financial Analyst) – Highly respected in investment management. Think Wall Street meets spreadsheets.
- ChFC®, CPA, EA – Also credible, depending on your needs.
Ask what those letters mean, not just what they spell.
3. Ask If They’re a Fiduciary
Big word, simple meaning: A fiduciary is legally bound to act in your best interest. Not “whatever’s good for the company,” not “whatever pays the biggest commission.”
It’s like the difference between a doctor who treats you and a salesperson who sells you vitamins.
4. Understand How They’re Paid
Money talk about your money? Necessary.
- Fee-Only: You pay them directly, like a consultant. No commissions.
- Commission-Based: They earn from what they sell. This can work—but be aware.
- Fee-Based (Hybrid): A bit of both. Transparency matters more than the model.
The key: You should know exactly how they’re paid—and feel comfortable with it.
5. Experience and Communication Matter
Credentials are great, but can they explain a Roth conversion without making your eyes glaze over? That matters too.
- How long have they been in the industry?
- Do they specialize in people like you (military, small business, retirees)?
- Are they proactive about checking in—or do you only hear from them when it’s time for an annual review?
Final Thought:
At the end of the day, your advisor should have the heart of a teacher, not the hustle of a salesperson. Ask questions. Expect straight answers. And don’t be afraid to walk away if something feels off.