CBS News online recently published a provocative online article titled “How to find a financial advisor you can trust.”

  The article written Larry Swedroe is available here.  My comments on Swedroes’ five salient points follow:

1.)     An advisor’s recommendations should be based on more than just glib personal opinion.  What evidence supports the advisor’s recommendations?  For example, is there a well-researched paper he can point to?  Preferably one that is published and peer-reviewed.

2.)    Are recommendations made to clients always provided under a fiduciary standard of care?  In other words is the advisor representing a Trust Company or Registered Investment Advisor Firm?  Or is the advisor a non-fiduciary salesman representing a broker-dealer or insurance company?  Some advisors wear two hats – fiduciary and non-fiduciary. These dual registered advisors can switch between fiduciary accountability to a lesser suitability standard of care.   Dual registration creates added potential for conflicts of interest.

3.)    “Advisors should be ‘eating their own cooking,’ meaning investing in exactly the same investment vehicles they’re recommending to you. The advisor should be willing to show you his own statement from the custodian holding his assets so that you can verify the veracity any claims.”  I couldn’t agree more.  Why would anyone take advice from an investment advisor who does not invest his own money?

4.)    Have a plan before you invest.  For example: do you have adequate life insurance and an estate plan including a will?  Are you taking advantage of IRAs and other tax advantaged retirement plans?

5.)    Get an advisor who holds high quality credentials.  The Chartered Financial Analyst (CFA), and the Certified Financial Planner (CFP) are two of the most respected and rigorous professional credentials that an advisor can attain.