Good Financial Adviser/Bad Financial Adviser (2024)

Based on the number of notes I’ve written in the margins, the quantity of words I’ve underlined, and how often I pull it from the shelf, The Hard Thing About Hard Thingsby Ben Horowitz has my vote for the best business book.

It contains an invaluable essay — “Good Product Manager/Bad ProductManager” — that serves as a useful training document for the position and expands on the characteristics, habits, and mindset that separate— you guessed it — good product managers from bad ones.

Inspired by that essay,here is my take on what distinguishes good financial advisers from the rest:

Good advisers understand financial planning, taxes, estate planning, insurance, economics, and investing. But more than that, they knowhow each affects their clients’ lives. Good advisers have a strong base of knowledge and confidence.

Good advisers champion their clients and take responsibility for their financial performance. They do not give excuses. They build relationships over timeto understand the complete context of a client’s situation. They take seriously the responsibility for devising winning financial plans that they can execute together with their clients. Bad advisersmake excuses for poor performance, lack of communication, fees, etc.

Good advisers know about smart investment strategies but recognize that investing is only the engine of a financial life, not the navigational system.The client sets the goals to navigate toward.

Good advisers take the time to have aconversationwith clients about their recent life events, priorities, goals, or objectives. Bad advisers spend their time telling clients about the performance of their accounts, their firm’s market forecasts, and a never-ending stream of hot investment ideas. Bad advisers don’t consider their clients’ non-investing financial priorities, such as estate planning and taxes.

Good advisers have an external focus. They are constantly looking to add value for their clients. They ask, “What are the pain points this client is dealing with and how can I help?” Bad advisers are inwardly focused, asking, “What are my priorities? What actions do I want this client to take?”

Good advisers clearly articulate why their clients should care about a particular financial strategy. Bad advisersmerely cover every feature, emphasizing technical accuracy over nuanced insight.

Good advisers ask the questions. Bad advisers wait for the questions to be asked.

Good advisers are continually learning. Bad advisers are set in their ways, insisting that, “This is how I’ve always done it, so why change now?”

Good advisers build trust by following through on commitments and explaining all planning and investing strategies in a way clients understand. Bad advisers say, “Trust me,” andleverage human nature, get-rich-quick schemes, and fear.

Good advisers givethe best advice they can, even if it’s boring and unsexy. They make sure their clients take their medicine, even when it doesn’t taste very good.

Good advisers know when to say “no” and have the courage to stand on principle. Bad advisers take orders from clients, even when those orders may be damaging to their long-term financial well-being, just to keep them with the firm.

Good advisers recognize that the future is unknown. They consider multiple possible outcomes and strive to maximize the probability of success in the face of an uncertain future.Bad advisers are 100% certain how their recommendations will work out.

Good advisers err on the side of clarity. They are willing to explain the obvious to ensure everyone is on the same page. Bad advisers assume everyone heard and understood.

Good advisers fulfill their commitments to clients and co-workers on time, every day, because they are disciplined. Bad advisers forget or neglect to because they don’t value discipline.

Good advisers proactively define their role and their success based on what’s best for their clients. Bad advisers prefer to be told what to do.

Good advisers make things as simple as possible while still considering all necessary factors. They focus on what matters. Bad advisers complicate things in an attempt to sound smart or to confuse clientsin order to sell more products.

The clients of good advisers know exactly how their adviser is paid. The clients of bad advisers have no idea, or worse, think they’re working for free.

And last but not least, good advisers are true fiduciaries.

What did I miss? How do you define a good financial adviser?

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/JJPan

Good Financial Adviser/Bad Financial Adviser (2024)


What to do if you are unhappy with your financial advisor? ›

All financial advisers should be registered with the FCA. This means they meet the right standards and you get more protection if you're not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong.

How do I know if my financial advisor is bad? ›

If you feel your Financial Advisor evades or ignores questions, changes topics frequently, or avoids details about commissions, then it could be worth considering if they are a good fit for your needs. Every advisor should make a good faith effort to help you understand all aspects of your plan.

When to fire your financial advisor? ›

Your Financial Advisor Ignores You

If your advisor, all of a sudden, stops returning your calls or emails or takes too long to get back to you, that could be a sure-fire sign you may need a new advisor.

What is a good vs bad financial advisor? ›

Bad advisers spend their time telling clients about the performance of their accounts, their firm's market forecasts, and a never-ending stream of hot investment ideas. Bad advisers don't consider their clients' non-investing financial priorities, such as estate planning and taxes. Good advisers have an external focus.

What is financial advisor misconduct? ›

There are numerous ways in which financial planners may abuse their positions of trust. Brokers have a legal obligation to act in the best interests of their clients. A broker may breach this duty by recommending financial investments that are not consistent with their client's investment goals or financial interests.

How often do people switch financial advisors? ›

People often switch financial advisors when they experience significant life changes or feel their current advisor is no longer suitable, but there is no set frequency for making such a change.

What is a red flag for a financial advisor? ›

On the other hand, fee-based or commission-based compensation structures can both be financial advisor red flags. These advisors may earn part or all of their compensation in sales commissions. In other words, they may be more incentivized to sell products than give advice.

How to tell if your financial advisor is good? ›

An advisor who believes in having a long-term relationship with you—and not merely a series of commission-generating transactions—can be considered trustworthy. Ask for referrals and then run a background check on the advisors that you narrow down such as from FINRA's free BrokerCheck service.

Do financial advisors have a bad reputation? ›

Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?

How to dump a financial advisor? ›

You can either call or email your advisor - but letting them know you're leaving and why is a nice thing to do. Your new advisor will actually do all the work of transitioning the accounts for you.

How often should you hear from your financial advisor? ›

Every relationship is different, and because financial planning is such a personal issue, there's no one-size-fits-all answer for how often you should talk to your adviser. But financial planner Don Grant says there should be a review at least semi-annually.

How long should you keep a financial advisor? ›

"If judging performance only, clients need to give an advisor three to five years minimum, and realistically, five-plus is probably better," said Ryan Fuchs, a certified financial planner with Ifrah Financial Services. "It may take several years before you can truly see how an investment strategy will work.

Who is the most trustworthy financial advisor? ›

The Bankrate promise
  • Top financial advisor firms.
  • Vanguard.
  • Charles Schwab.
  • Fidelity Investments.
  • Facet.
  • J.P. Morgan Private Client Advisor.
  • Edward Jones.
  • Alternative option: Robo-advisors.

Does it matter who your financial advisor is? ›

The number of different services and areas of expertise advisors provide makes finding the right financial advisor for your situation key — doing so means you won't end up paying for services you don't need, or working with an advisor who isn't a good fit for your financial goals.

What is the downside of using a fiduciary? ›

A disadvantage of a fiduciary is that fiduciary advisors are often more expensive than non-fiduciary advisors as they charge higher market rates.

How do you get your money back from a financial advisor? ›

Yes. Specifically, if your advisor was licensed through the Financial Industry Regulatory Authority (FINRA), you can file an arbitration claim to get some or all of your money back. Whether your claim will succeed depends on exactly what happened.

Can I change my financial advisor? ›

Yes, you can switch financial advisers at any time. You have the right to change if you're not satisfied with the service you're receiving. However, it's important to check your contract with your existing adviser, as there may be termination fees you'll need to pay.

Why do clients leave their financial advisor? ›

Underwhelming performance is a common reason clients leave financial advisors. Your client may expect a certain rate of return, for example, and be disappointed when you're not able to produce it.

How to politely decline a financial advisor? ›

It's best to say something about how you appreciate the offer, but now is not the right time, and you will reach out when the time comes. This allows you to buy time and puts you back in control.


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