More than Trustworthy

According to a recent YouGov survey, the most important factor for people choosing an investment professional is trustworthiness. In fact, trustworthiness ranked higher than fees, qualifications and expertise, and personalized approach and attention.

Going back to my early days as a financial planner (and occasional writer), I remember regularly telling people to look for someone “trustworthy.” For many years, it seemed this was the primary qualification for a financial advisor or planner.

I think the narrative of trustworthiness grew out of a time when the financial industry operated behind a curtain. This was a time before the internet, before low-cost investment options, when there was less transparency. Some financial advisors in those early days may have been unscrupulous, potentially even putting clients into products that helped the advisor more than the client.

But nowadays people seem to be better informed about the financial industry. More consumers now ask whether an advisor is a fiduciary—a term that was unfamiliar to most people ten years ago. (For those who aren’t familiar with the term, a fiduciary has a legal and ethical obligation to act solely in the best interest of the client.)

People have much higher expectations today about trust in their financial advisors, and the industry has shifted as a result. A growing portion of the industry now operates under a fiduciary standard. According to the SEC, the number of registered investment advisors (RIAs) has grown from about 6,500 to nearly 16,000 in the last 25 years. The regulatory assets under management have grown sevenfold over this same time.

Anecdotally, the advisors I meet all seem trustworthy. It’s possible that I’m naive, but the people I meet in this business seem to be authentic and ethical, even if we do things differently. Trustworthiness is critically important, but in today’s environment an advisor or planner wouldn’t stay in business very long without meeting that basic expectation.

Which makes me think it’s past the time to seek something greater than integrity alone from financial professionals.

First, how about finding someone with the knowledge, skill, and expertise that you need? If you’re planning for retirement, does the advisor have expertise in retirement planning? Do they have knowledge of Social Security claiming and retirement withdrawal strategies? If you’re looking for someone to manage investments, what experience does a potential advisor have in analyzing markets?

Not all advisors have comprehensive expertise, so find someone that meets your needs. You might consider seeking an advisor with past experience or credentials such as undergraduate and graduate college degrees, and designations such as the CFP® (Certified Financial Planner), ChFC (Chartered Financial Consultant), and CFA (Chartered Financial Analyst).

That should get you from trustworthy to competent. And then it’s important to find someone who can communicate. This can mean different things to different people. Some want an advisor who can talk at a simple level about the investments and strategies they use. Others might want a deeper conversation about investment strategy or tax planning. Some would rather avoid oral communication and prefer an advisor who can communicate effectively in writing. The important thing is to find an advisor who can meet your communication needs.

You also want to establish guidelines for the frequency of communication. Do you prefer a more hands-off advisor who only contacts you once a year for a quick review, or are you more comfortable with quarterly check-ins?

Finally, what about the cost of services? You wouldn’t hire a roofer without pricing out a few options, so why would you take the first quote that comes your way with a financial advisor? How does your advisor get paid? Is the advisor compensated through commissions on financial products or does the advisor take an annual percentage of assets?

The business model will impact the relationship. An advisor who is compensated through commissions may have different incentives than one who operates under a fee-based or fee-only model. Some investors prefer a traditional brokerage relationship, while others want the ongoing planning focus typical of RIAs.

Selecting an advisor is an opportunity to interview lots of types of people and find one right for you. You wouldn’t buy the first dishwasher you saw at the store, and you shouldn’t necessarily pick the first advisor you meet. This is someone that you might pay thousands of dollars a year to for the rest of your life. Try to find someone that will be the right fit for you. For business owners, executives, and retirees alike, the stakes are high when selecting a financial advisor.

Trustworthiness is now the baseline, not the end goal. In an industry that has become more transparent, investors can look beyond character alone and look for real value—expertise, communication, alignment of incentives, and the ability to meet their specific needs. A trustworthy advisor is essential, but the right advisor should also be skilled, a clear communicator, and equipped to help you reach your goals.