Very few investors conduct meaningful research when they select a financial advisor. They let the advisor turn selection into a sales process that is controlled by advisors who want to sell them financial advice, services, and products.

There is an alternative. Investors should use the services of a qualified third party like Paladin Research to do the work for them. Paladin has vetted the quality of thousands of advisors and firms since 2003. For a nominal fee, Paladin researchers will identify critical issues about professionals and firms that create unnecessary exposure for investors.

If you were to guess, what do you think the top four criteria are that most investors rely on when they select financial advisors to help them accumulate and preserve assets for retirement?

  1. Sales pitch
  2. Personality
  3. Brand name
  4. Referral

How are these subjective criteria working? Every year millions of Americans fire advisors and use the same criteria to replace them. More importantly, each time they change advisors they increase their risk of not achieving critical financial goals that impact when they retire and how they live during retirement.

The Wrong Criteria 

The above criteria create a major financial risk that stays hidden until it blows-up. By then it is always too late. The damage has already been done.

What is wrong with the four criteria? The short answer is they have nothing to do with advisor competence or the ethical treatment of investors.

  1. The content of sales pitches is totally controlled by advisors. You hear what they want you to hear. Any information that could negatively impact the sales process is withheld.
  2. Selecting advisors that investors like best is fraught with risk. Investors tend to trust people they like and all too often they end-up trusting the wrong advisors for the wrong reasons.
  3. Brand name firms have paid billions of dollars of fines for ripping-off their clients. There is no advantage selecting an advisor from a brand name company. There are several disadvantages.
  4. Referrals may seem like the safe way to select advisors, but it is also a major source of hidden risk. What if a CPA has a reciprocal referral relationship with an advisor? Or, perhaps friends gave advisors too much credit for performance in a bull market.


Transparency is the process of advisors volunteering information that helps investors make the right decisions. No material information is withheld that will cause investors to make bad decisions.

Unfortunately, advisors have to make a living. Consequently, they will withhold key information that may cause investors to reject them and their sales recommendations.

This means investors have to ask the right questions to obtain the information they need to make the right selection decisions. They have to know good answers from bad ones. And, all responses should be written, so investors have a permanent record. This is a tough assignment when they are up against slick salesmen who have heard all of the questions a thousand times before.

The Right Criteria 

What are the right criteria when investors select financial advisors who purport to be investment experts? The focus should be on criteria that impact the competence and trustworthiness of advisors – not their personalities and sales pitches. For example, investors should know about:

  • Competence: Education, experience, certifications; association memberships
  • Ethics: Compliance record, criminal record, fiduciary status, transparency, Code of Ethics
  • Business Practices: Compensation, reporting, documentation, communications
  • Services: Provide financial advice and services or sell investment and insurance products

Contact us, to Research Any Advisor.