The P’s of Evaluating a Financial Advisor

by Ron Haynes

Too many people only use only one P when evaluating a financial advisor – Performance, more accurately past performance. That’s why most of them have disclaimers that past performance may not accurately reflect future results. As I’m in the throes of selecting a financial advisor (using WiserAdvisor), I’ve thought of three more P’s that I should be using as well.

Don’t get me wrong, I will ask about an advisor’s track record, but that is just one factor in making an accurate evaluation of a financial planner. It may be that several non-performance factors are the key indicators of an investment advisor’s success and potential.

(As I go through the process of using WiserAdvisor to help me select a financial planner, I’ll keep you posted.)

My 3 P’s of evaluating a financial advisor

  • Philosophy
  • Practices
  • People


While different Investment styles come and go, an advisor’s consistency of philosophy and focus is an important component I’ll use to make my personal assessment. I’m looking for a financial advisor with a long term commitment to a winning investment philosophy, not someone who chases the latest and greatest investment fad.


In a lot of cases, mediocre financial advisors have generated very impressive returns when their investment style is in popular … even over a longer term than you might think. But when that particular investing style falls out of favor, things can get ugly.

Remember what happened in the late 90’s with the huge growth investment craze? Unbelievable returns were generated by growth investors who failed to ask whether these returns were likely to continue in the future. They ignored common sense and when the market collapse began in early 2000, reality reared its ugly head.

I’m not interested in someone who is trying to predict the future. I want an investment advisor that has a strong commitment to a winning philosophy.

a few of My questions:
  • What checks and balances are in place at your firm?
  • What IS your investment philosophy?
  • How do you balance “value,” “growth,” and “income?”
  • Have you ever subscribed to “contrarian” investing?
  • What about commodities, overseas, emerging markets, and technical theories of investing?
  • How long have you held those beliefs?
  • Is there an investment philosophy that you believe is best for me?


By practice, I mean how does an advisor execute his or her philosophy? The main thing I’m looking for is: Does the financial advisor’s practices indicate a willingness to risk someone else’s money? I don’t want someone who will deviate from a winning philosophy that isn’t currently producing big-time results in order to produce some short-term gains just to impress me. After all, I’m in this for the long term.

A few of my questions:
  • How do you resist chasing a stock, ETF, or mutual fund?
  • How do you respond when you hear that an investment is expected  “take off?”
  • Do you believe in the efficient market hypothesis?
  • Can you time any portion of a market?


Who else will I be working with? Let’s face it: any advisor has a support staff and they can make or break the advisor and the firm. I want to know everyone I’ll be dealing with, who will answer my questions, who will oversee things when the advisor hands my account off. Who will decide if an employee needs to get more training or needs to be encouraged to work elsewhere?

What is the firm’s personnel turnover rate? I don’t want to hire a financial advisor if he or she can’t keep a team together. Would you? How will you know if you don’t ask?

A few of my questions:
  • What is your firm’s personnel turnover rate?
  • What is the average tenure of your staff?
  • Who all will I deal with once I’m on board?
  • What is your background and the background of your staff?
  • What financial advisor training have you and your staff had?

Those aren’t the only questions I’ll ask

Some other considerations I need to clarify include:

  • Are you an independent financial advisor or are you captive to a certain firm’s investments?
  • What financial planner certification(s) do you hold?
  • How are you paid?
  • How are your analysts paid?
  • Does the financial planner’s style and personal risk tolerance match the my own?
  • Has there been a major change in the firms general portfolio?
  • Has there been a change in the firm’s ownership?
  • Is the advisor able to fully account for his or her under or over performance in the past?

There probably is no end to the questions I could ask, but these are a good start! What other questions should I ask?

About the author

Ron Haynes has written 988 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.