Investment returns alone will not tell you. A good advisor gives you a written plan that covers market drops, taxes, income, health costs and what happens if one of you dies, and coordinates it with your CPA and attorney. The ten checks below give your current plan a score out of 20.
How do I know if my financial advisor is any good?
Score each item 0 if it has not been addressed, 1 if it has been partly addressed, and 2 if there is a written policy or document.
| # | Does your plan have this? | Score |
|---|---|---|
| 1 | Written rules for market drops, including what changes at declines of 10%, 20% and 30%. | 0 / 1 / 2 |
| 2 | A five-year tax map: brackets, Medicare surcharge look-back, Roth conversion windows and how required withdrawals will grow. | 0 / 1 / 2 |
| 3 | An income plan: sources, start dates, what changes for a survivor, and essential versus discretionary spending. | 0 / 1 / 2 |
| 4 | Written rules for which accounts you draw from, and when, rather than one rule for every situation. | 0 / 1 / 2 |
| 5 | A plan for health costs and long-term care: Medicare, care risk and how it would be paid for. | 0 / 1 / 2 |
| 6 | A plan for getting at cash in the first 90 days after an incapacity or death. | 0 / 1 / 2 |
| 7 | Beneficiary designations and account titling reviewed and documented. | 0 / 1 / 2 |
| 8 | Clear coordination with your CPA, attorney and insurance professionals, with one person accountable for follow-through. | 0 / 1 / 2 |
| 9 | A set review schedule, triggers for an unscheduled review, and written updates. | 0 / 1 / 2 |
| 10 | Your advisor can explain the whole plan in plain language in five minutes. | 0 / 1 / 2 |
What does my score mean?
| Score | What it means |
|---|---|
| 0 – 7 | Separate pieces, not a plan |
| 8 – 14 | Partly coordinated |
| 15 – 20 | A coordinated plan with someone accountable for it |
A score below 15 does not mean your advisor is incompetent. It means the plan is being managed in pieces. The gaps the score shows are the places where a plan tends to break once it comes under stress.
What should happen in a first meeting with a financial advisor?
A first meeting should be a diagnostic, not a presentation. You are not there to hear the firm’s history. You are there to find out whether this person thinks about your situation the way it deserves. A good first meeting covers five things:
- Your whole retirement picture: investments, income sources, taxes, Medicare and health costs, insurance, estate basics and spending.
- What looks sound and what needs a closer look, including at least one specific risk the advisor found in your situation.
- Every way the advisor and the firm are paid, including advisory fees, fund expenses, insurance commissions and referral arrangements.
- How they work with your CPA, attorney and insurance professionals, and whether they do it without being asked.
- What the ongoing relationship looks like: how often you meet, what triggers an unscheduled review, and how changes are written down and carried out.
If you leave without knowing those five things, schedule a second meeting or find someone else.
What should my advisor be able to tell me if I died this year?
A good advisor can walk your spouse through the first 90 days: what changes, what must be decided, and what can safely wait. They can show that your will, trusts, beneficiary designations and account titles all match, and who keeps coordinating everything if your spouse is the one calling alone.
How do I judge my financial advisor’s investment returns?
- Against the right yardstick. Compare your portfolio with a mix of indexes that matches it. A 60/40 portfolio should not be measured against the S&P 500 alone.
- After every fee. Advisory fees, fund expenses and any product charges all come out of your return.
- Over years, not quarters. Look at 3, 5 and 10 years. Any manager can have a good or bad year.
- Including the losses. Ask how far the portfolio fell in the worst stretch, and whether that matches the risk you agreed to take.
Returns are only part of the job. A portfolio that beats its benchmark can still fail a plan that has no answer for taxes, income or a surviving spouse.
How do I know what I am paying my financial advisor?
Add up every layer: the advisory fee, the expense ratios of the funds you hold, and any commissions or charges inside insurance, annuities or other products. Ask for the total for last year in dollars. A good advisor can tell you without hesitating. If fees changed, you should have been told why.
What are the warning signs of a bad financial advisor?
- You hear from them mostly when they have something to sell.
- They cannot give you, in writing, every way they are paid.
- No one has asked for your tax return in the past year.
- Performance is discussed in good years and avoided in bad ones.
- Your questions get jargon or pressure rather than plain answers.
- They do not appear on the SEC’s or FINRA’s public registers.
Frequently asked questions
How often should I hear from my financial advisor?
At least once a year for a full review, and whenever something changes: a market drop, a death, a sale or a move toward retirement. A good advisor calls before you have to.
What benchmark should my portfolio be compared to?
A blend of indexes that matches what you own, such as US stocks, international stocks and bonds in your actual proportions, measured after fees.
When should I get a second opinion on my financial advisor?
When your score on the ten checks is below 15, when you cannot find out what you pay, or before a decision that cannot be undone, such as claiming Social Security or buying a policy or annuity.
How do I switch financial advisors?
Open an account with the new firm, which requests the transfer from the old one. Holdings usually move without being sold, so there is no tax from the move itself.
Questions to ask your advisor
- If I scored my plan on these ten checks today, what would the score be, and which gaps would we close first?
- Can you show me my whole plan on one page, and tell me what breaks first in a severe downturn?
- Who owns the job of coordinating investments, taxes, insurance and estate planning, and how does that continue if my spouse is calling alone?
Related: What does a financial advisor do? · How to choose a financial advisor
Related questions
Want a second opinion on your score?
Schedule a conversation or read Chapter 1 of Financial Fortress.
This page is general education, not advice for your situation. Triathlon Partners LLC is a registered investment adviser in Connecticut and New York. Registration does not imply a certain level of skill or training.