Hiring A Financial Adviser Without Getting Sold Something

Start with one sentence, and make them answer it in writing: Will you act as a fiduciary for me, on all of my accounts, at all times?

Not "do you put clients first." Everyone says that. The poster in the lobby says that. Ask for the word fiduciary, in writing, with no carve-outs, and watch what happens to the room. A registered investment adviser will say yes and hand you a form. Somebody who only wears the fiduciary hat on Tuesdays will start explaining. The explanation is the answer.

That's the whole game in one paragraph. The rest of this is how to check the claim yourself, what the fee models actually cost you in dollars, and the questions that separate a planner from a product guy.

Fiduciary is a legal standard, not a personality trait

Investment advisers registered with the SEC or a state regulator owe clients a fiduciary duty under the Investment Advisers Act of 1940. Duty of care, duty of loyalty. Conflicts have to be eliminated or fully disclosed.

Brokers operate under a different rule. Regulation Best Interest, adopted by the SEC in 2019, requires a broker-dealer's recommendations to be in your best interest at the time they're made. That's a real improvement over the old suitability standard. It's not the same thing as an ongoing fiduciary relationship, and it applies to recommendations, not to the whole arc of your financial life.

Plenty of people are dually registered. Same human, two hats, and the hat can change mid-meeting depending on which product is being discussed. That's legal. It's also exactly why you want the commitment in writing rather than in conversation.

If the person holds a CFP mark, the CFP Board's own standards require them to act as a fiduciary when giving financial advice. That helps. It's still worth getting it on paper from the firm.

"Fee-only" and "fee-based" are one word apart and worlds apart

Fee-only means the firm's compensation comes from you and nobody else. No commissions, no trailing payments from fund companies, no bonus for moving an insurance product.

Fee-based means fees and commissions. It's a marketing term built to sound like the first one.

Ask it directly: "Does your firm or anyone at it receive any compensation from any third party related to my accounts?" Then ask the follow-up nobody expects. "Does your firm pay you more for some recommendations than others?" Revenue sharing, proprietary funds, sales contests, and referral arrangements all show up in the paperwork, which brings us to the free part.

Look them up before you ever sit down

Ten minutes, two websites, no cost.

• adviserinfo.sec.gov — the SEC's Investment Adviser Public Disclosure site. Search the firm and the individual. It also pulls FINRA BrokerCheck records, so you'll see brokerage history in the same place.
• letsmakeaplan.org — the CFP Board's directory, to confirm the mark is current and see any board discipline.

On the firm's Form ADV Part 2A brochure, read three things. The fee section, in full, including the part about how fees are billed and whether they're negotiable. The disciplinary section. And the section listing other business activities and affiliations, which is where you learn that your prospective adviser also owns an insurance agency.

Then read Form CRS. It's the short client relationship summary, usually two pages, required of both advisers and brokers. It has a plain-language question near the end about how the firm makes money and whether anyone has a legal or disciplinary history. If the CRS and the sales pitch don't match, believe the CRS.

One more: ask who holds your money. The adviser should not. Assets belong at an independent custodian, Schwab or Fidelity or similar, where statements come from the custodian directly and you can log in without the adviser's help. That single structure prevents the worst-case scenario, the one where the beautiful quarterly reports were coming off a printer in the adviser's back office.

What the fee models actually cost

These are illustrative examples, made up for the math, not quoted rates.

Percentage of assets. Say a firm charges 1 percent a year and manages $900,000 for you. That's $9,000 annually, billed quarterly from the account so you never write a check. Painless, which is the point. Over ten years, ignoring growth entirely, it's $90,000. Ask whether the rate breaks down at higher balances and what's included. Tax planning? Estate coordination? Or just the portfolio?

Flat annual retainer. Say $7,500 a year regardless of balance. Predictable, and it doesn't punish you for having saved well. Some households find it expensive at $400,000 in assets and a bargain at $2 million.

Hourly or project. You pay for a defined piece of work. A Social Security claiming analysis, a withdrawal-order plan, a second opinion on what you already own. You keep managing the accounts yourself.

The percentage model has one quiet flaw worth naming. If the honest answer to your question is "pay off the mortgage" or "buy more I bonds" or "put $200,000 in a bank ladder and stop thinking about it," an adviser paid on assets under management gets paid less for saying it. Good ones say it anyway. Ask how they handle that conflict and see whether they've clearly thought about it before.

The questions, in order

1. Are you a fiduciary to me at all times, in writing, on every account?
2. How do you get paid, and what's the total annual cost in dollars for a household like mine, including fund expenses?
3. Are you fee-only?
4. Who's your custodian?
5. Who are your clients? Retirees drawing down, or accumulators? These are different jobs.
6. Walk me through your withdrawal sequencing. Which accounts do you draw first, and why?
7. What's your take on Social Security claiming, and do you model it or guess?
8. How do you handle Medicare and IRMAA, the income-related surcharge on Part B and Part D premiums?
9. Do you do Roth conversion analysis, and do you coordinate with my CPA?
10. What happens to my plan if you get hit by a truck? Who's the successor?

Question six is the one that separates retirement advisers from investment salesmen. The accumulation phase is mostly discipline. The distribution phase is a tax problem with a market attached, and it involves the IRS, the Social Security Administration and Medicare all at once. Someone who can only talk about portfolios is answering a smaller question than the one you asked.

Fire-the-relationship red flags

Urgency about anything. A product recommendation before a plan. Guaranteed returns. Reluctance to email you the fee schedule. A performance chart with no benchmark. Blank forms, ever. A pitch built on fear of a coming collapse, which is a business model, not an outlook.

And the softest one: you leave the meeting unable to explain what you now own. If you can't say it out loud to your wife over dinner, you didn't buy it. You were sold it.

Bring your own adults

A fee-only fiduciary, a CPA and an estate attorney make a good trio, and they should be willing to talk to each other. Get the engagement letter. Read the termination clause, because the easiest way to leave should be easy.

None of the above is advice about your situation. Ages, contribution limits and income thresholds move, sometimes annually, so verify anything numeric at SSA.gov, Medicare.gov and IRS.gov, then sit down with a professional who has seen your actual tax return. What comes next, the part where you figure out what all this money is for, belongs over in BRO Seniors.

Hire slow. You're not renting a car. You're picking the person who'll be on the phone the week the market drops 20 percent and your wife asks if you're both going to be all right.