The "3 C’s" of Finding a Trustworthy Financial Advisor

As we settle into 2025, I want to help you navigate a challenge that a lot of people face with their financial New Year’s Resolutions— maybe you’re feeling it too. It goes like this: you set a financial goal, maybe it’s buying your first house, or retiring with enough money to take your whole family on annual vacations, or, maybe you’re just killing it in your career and you want to know how to make your money work harder for you. Whatever your goal is— you’ve set it, you feel excited about it, you’re ready to make it happen.

And then… you realize something… 

You don’t actually know how to get there. 

Setting goals is not something you can outsource— that is deeply personal and just depends on how you want to live your life. But, making the strategy to help get you there? That is something that you can outsource to a wealth advisor. But I get it - it can feel really overwhelming to let someone into your financial life. So today, I’m sharing advice on finding the right wealth advisor for you from financial rockstar Peter Mallouk. 

Peter is the President and CEO of Creative Planning, an award-winning wealth management and investment advisory firm with over $345B in combined assets under management or advisement by Creative Planning and its affiliates as of September 30, 2024. You guys know Peter - he’s been on my podcast before and is one of the smartest people I know in the industry. I’m such a fan of Peter and the work he and his team does that I wanted to combine forces and do more together to help more people with their financial goals. So, I joined Creative Planning as a Financial Education Advocate. This week, he joined me on Money Rehab to give his insider advice on finding the right wealth advisor for you. Here’s the Money Minute spark notes….

When Should You Consider a Financial Advisor?

First things first: when do you actually need a financial advisor? According to Peter, once you've hit that $100,000 mark in savings, it's time to start thinking about professional help. Why? Pre-six-figures, it might make sense for you to grow your nest egg through a robo-advisor or as I say, Index-Funds-and-Chilling. But post 100k, you're likely ready to level-up with a more sophisticated, personalized strategy.

The Must-Have Qualities in a Financial Advisor

Now, let's talk about what to look for in a financial advisor. Peter breaks it down into what he calls the 3 C’s:

1. Custody

This is non-negotiable. Your advisor should never have direct custody of your money; meaning, an advisor should never ask you to fill out a check signing over all of your assets to them (yes, that really has happened). Instead, your funds should be held by a third-party custodian (think a brokerage like Charles Schwab or Fidelity). This is a crucial safeguard against potential theft or fraud.

2. Credentials

Make sure your advisor has the right qualifications for the job. Peter recommends that you look for designations like a Certified Financial Planner (CFP) for financial planning and a Certified Public Accountant (CPA) for tax advice. Peter also says you want an advisor who regularly works with clients in your financial bracket. If you've got $250,000 to invest, you don't want someone who typically deals with multi-millionaires (or vice versa). Lastly, and this is a biggie: you want an advisor who is legally obligated to act in your best interests 100% of the time. 

3. Cost

Peter also notes that you should understand exactly what you're paying for. Are financial planning services included in the fee? What about tax advice? Do they take a percentage of assets under management or a flat fee? Make sure you're getting value for your money and that you have the best chances of coming out ahead.

Red Flags to Watch Out For

When vetting potential advisors, Peter says to keep an eye out for these warning signs:

• They're billing themselves as a wealth advisor, but they’re only registered with FINRA (Financial Industry Regulatory Authority). This means they're a broker, which can lead to conflicts of interest. What you want is a CFP (thank you to our 2nd “C”!).

• They push insurance products as investments. This is often a sign they're more interested in commissions than your financial well-being.

• They claim they can consistently beat the market. Peter and I agree here: it sounds too good to be true, it probably is.

Preparing for Your First Meeting

Feeling nervous about meeting with a financial advisor? I get it. Before my first visit with a financial advisor I was… sweaty. Remember, you're the client. The advisor should be trying to impress you, not the other way around. But if you are feeling nervous, it always helps to feel extra prepared. Here’s what Peter says to bring to your first meeting:

• Investment statements

• A list of your financial goals

• Questions about their investment philosophy and approach

How to Measure the Relationship with Your Financial Advisor

Once you've chosen an advisor, how do you know if they're doing a good job? Here are a few key indicators from Peter:

• Communication: Are they responsive and proactive in reaching out?

• Performance: How does your portfolio compare to relevant benchmarks?

• Problem-solving: Can they help with financial questions beyond just investments?

Ideally, you should meet with your advisor at least once a year for a comprehensive review of your financial picture. During those annual reviews, you should go through those three key indicators together to determine whether the relationship is working.

The Bottom Line

Choosing a financial advisor is a big decision, but it doesn't have to be an intimidating one. By focusing on the "Cs" - custody, credentials, and cost - you can find an advisor who's truly aligned with your financial goals. If you want to hear more about how they can help you with your financial goals, set-up a FREE 15-minute call with the Creative Planning team here.

Remember, the right advisor isn't just someone who can manage your money effectively. It's someone you trust and feel comfortable with. After all, you'll be sharing some pretty personal information with them (like whether you're planning to get married, or have a baby… 🙋‍♀️).

So take your time, do your research, and don't be afraid to ask tough questions. Your future self (and your bank account) will thank you.

Nicole