Overview of What to Know Before Hiring a Financial Advisor
This BiggerPockets Money episode explains how to prepare for your first financial advisor meeting so you can get more value from the engagement, whether you want comprehensive financial planning or a one-time/hourly consultation. Scott Trench and Mindy Jensen walk through how advisors get paid, why licensing and designations matter less than many people think, what documents and goals to bring, and the best questions to ask before hiring someone.
Advisor Fee Models and What They Mean
The hosts break financial advisors into three broad compensation models:
1. Assets Under Management (AUM)
- Advisor charges a percentage of the assets they manage, often around 1%.
- Can be a good fit for people who want to fully hand off investment management and planning.
- The hosts acknowledge this model is often criticized in the FI community, but it can still make sense in complex situations.
2. Flat Fee / Hourly / Advice-Only
- Often the preferred model for BiggerPockets Money listeners.
- Best for targeted help: one decision, a few high-stakes questions, or a second opinion.
- Keeps costs clearer and reduces some conflicts of interest.
3. Commission-Based Sales
- The hosts strongly discourage this model.
- Biggest concern: advisors may earn more by selling you products like whole life insurance or annuities.
- They view this as the most problematic model due to obvious conflicts of interest.
CFP, Licenses, and What Actually Matters
The episode makes a point that credentials are useful, but not everything.
CFP designation
- Helpful as a signal, but not a guarantee of quality.
- A CFP can still be a poor fit if their business model is commission-heavy.
- The hosts are skeptical of treating CFP status as an automatic trust signal.
Series 65 / Series 66
- These are the licenses typically needed to provide paid financial advice.
- They show the advisor is legally allowed to give advice, but they are not proof of excellence.
Main hiring principle
- Experience, fit, and compensation model matter more than letters after someone’s name.
- You should care more about whether the advisor has worked with people in situations similar to yours.
What to Bring to Your Financial Advisor
The episode emphasizes that better prep leads to better advice.
1. A clear picture of your finances
Bring one of the following:
- A folder of statements and account documents
- A financial aggregation tool like Monarch
- A personal financial statement (PFS), especially if you have real estate, private equity, debt funds, pensions, or other nonstandard assets
Helpful items include:
- Investment accounts
- Retirement accounts
- Real estate holdings
- Mortgages and other debts
- Cash flow and spending data
- Any private investments or illiquid assets
2. Your goals
Be ready to explain:
- What you want money to do for your life
- Your time horizon
- Any major trade-offs you’re willing or unwilling to make
- Your spouse’s goals, if relevant
The hosts stress that vague goals lead to vague advice. A planner can help more if you arrive with a real decision or problem to solve.
3. A short summary of what you need help with
Examples:
- “We’re close to financial independence, but one spouse wants to stop working.”
- “We may want to do a Roth conversion next year.”
- “We’re worried about tax-deferred account balances becoming too large.”
- “We want a second opinion before buying permanent life insurance.”
4. An investor policy statement
- Your current philosophy on investing, risk, and asset allocation
- Especially important if you have nontraditional assets like real estate or private investments
- Helps the advisor understand your mindset and avoid recommending something that clashes with your preferences
Questions to Ask Before Hiring an Advisor
The hosts recommend interviewing at least three advisors before choosing one.
Core questions
- What experience do you have with clients like me?
- How are you compensated?
- Do you make money from products you recommend?
- Exactly how much will I pay?
- Will you manage my money, or is this advice-only?
- Are you a fiduciary?
- Who will I actually work with?
- Do you provide tax, estate, or insurance advice?
Why these matter
- Compensation reveals incentives.
- Fiduciary status helps, but doesn’t eliminate bias.
- Knowing who you’ll work with prevents surprises.
- Clarifying services up front avoids paying for expertise you expected but don’t actually get.
What a Good Engagement Should Produce
Scott lays out a simple framework for what a successful financial planning engagement should deliver:
1. Diagnosis
- A clear understanding of your current financial position
- Identification of the main problems, risks, and opportunities
2. Direction
- A high-level plan or philosophy
- Example: invest in index funds, pay off rentals, shift tax strategy, etc.
3. Specific actions
- Concrete steps to take now
- Or confirmation that you’re already on the right track
4. Best-practices checklist
- Insurance review
- Beneficiary updates
- Estate planning follow-through
- Other personal finance housekeeping tailored to your situation
If the advisor doesn’t give you something like this, the hosts suggest the engagement may not have been worth it.
Main Takeaways
- Decide first whether you need full-service planning or targeted advice.
- For most DIY-minded listeners, hourly or flat-fee advice-only help is the best fit.
- Avoid commission-heavy advisors if possible, especially for insurance and annuity sales.
- Bring organized financial data, clear goals, and a written summary of your problem.
- Interview multiple advisors and ask direct questions about fees, fiduciary duty, and scope of services.
- The best advisor is not just credentialed — they’re the one who understands your situation and can give advice aligned with your goals.