Finding A Good Financial Advisor

Today, I would like to talk a little about a topic that I never discuss on my website. That is my profession as a registered investment advisor. I do not normally talk about my profession, my company or anything else related to my career. I don’t even list my company name on Buy Like Buffett or disclose any information about my investment advisory business. That is because I try to keep my business interests separate from my blogging. So, why am I writing about this today?

It’s because I read an interesting article by Neil at Wealth Pilgrim about How To Hire A Top Financial Advisor Even If You Don’t Have Much To Invest. The post struck a chord with me because it falls right into what I do for a living. Neil hits it right on the head about how you can get a great financial advisor without a lot of money. Let’s take a look as to why investment advisers operate as they do.

Why do we require such large minimum investment amounts?

Most good financial advisors normally have high investment minimums. My investment minimum is $100,000. This may seem high but it is actually on the low end in the investment industry. Most people assume that the sole reason for this is because it makes sure that you only attract clients that have significant assets. This is partially true but there are other reasons as well. It is easier to diversify a portfolio with larger amounts of money and saves you time and a lot of headaches.

An investor who invests $1,000 with you is a lot more likely to contact you every time that there is a dip in the market. They tend to panic more when the market fluctuates and often need more day to day hand holding.  I have noticed that investors with higher net worths tend to understand how the market works and require less contact. This is important because most advisors spend most of their day researching investment opportunities and watching the market.

Another reason for the high minimum is because it directly relates to the fees charged. Advisors typically fall into two classes: fee only or assets under management. A fee only advisor charges a fee based upon the services provided for the client. Fee only advisors earn no commissions and get paid based on the services performed. Although the fees are fixed, they can cost some individuals a lot more than others.

For example, a  fee that appears to be a bargain to one client may look expensive to another. If you have a client that has $2,500 to invest and your fee is $250, they will likely bristle at that amount because it’s 10% of their total investment. This means that you have to generate a return over 10% just to make money for the client. A client with $100,000 to invest thinks nothing of the fee because it is just 0.25% of their total investment.

Advisors that have assets under management normally charge an annual fee for managing your portfolio. Fees start at 1% and up. If a client invests $10,000, then the firm’s annual fee would only yield $100. Another client that invests in $100,000 would net the firm $1,000. A $1,000,000 investor would net the firm $10,000. Although the percentages are the same, you can see how different the amounts are for the firm.

When do we waive the minimum investment required?

Just like everything else in life, the minimum investment amount is not set in stone. It can be waived at the advisor’s discretion. I have waived minimum amounts for family members, friends, and persistent people. Neil is exactly right when he says that an investment advisor will take on a new client because an existing client asks them. I have taken on clients who did not meet my minimum amount because a long term client asked me too. I have also taken on clients that were persistent about investing with me. It’s like anything else in life. Persistence pays off.

You can convince a top advisor to lower their minimum for you. You just need to know how to schmooze them. Let them know that you are really looking forward to investing with them via a letter, phone call, or email. If the adviser is human at all, they will likely make an exception for you.

Who needs a financial adviser?

One of the primary reasons that I started this site and wrote a book was to help people that wanted to learn more about investing on their own. I thought it would be cool to offer investment insights for anyone that wanted to read them. I wanted to show that investing doesn’t have to be this complicated matrix that is best left to professionals only.

I am slightly biased but I think that investment advisors are great! You just have to make sure that they are appropriate for you. I cannot tell you the number of times that I have had to convince someone that they were better off performing some financial task themselves rather than paying me a fee. I think that part of the reason that people want a financial advisor is prestige. Who wouldn’t want to go to a party and say I need to talk things over with my financial advisor before I do that? (Joking of course!)

Do you need a financial advisor? It really depends on your situation. I think that financial advisers that offer investment management services are great for high net worth individuals and high income people. Fee only advisors are good for the ordinary investor that may need guidance because they only have to pay hourly for a specific service. Investors with a solid investment IQ and the time to commit to their portfolio may be better off going it alone.

Photo by laughlin


  1. Thanks for this post. I don’t think I need a financial planner at this time. I probably will need some help when I roll over my 401k to an IRA and has more control over that chunk. My taxable investment account is a manageable size right now.
    Is the fee charged on an annual basis? I had a bad experience with the bank’s “no fee” financial adviser when I started investing years ago and went it alone since that time. That topic will probably be a post at some point.

  2. BLB, I agree SOME advisers provide a good service.. however, most advisers are not spending their time “doing research and monitoring the market”. They are prospecting for new clients! The advisers that make the most $ are the best sales reps!

    • I think the commission based advisers spend their time chasing leads for new clients. Most of the ones that I know of don’t chase clients.

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