How to Choose a Financial Advisor in Los Angeles: Savvy Investor Tips

Are you considering hiring a financial advisor? You’re not alone – and you’re wise to weigh this decision carefully. Americans increasingly recognize the value of professional financial guidance: surveys show financial advisors are viewed as the most trusted source of financial advice, and those who work with one report much higher confidence in their financial future. (Napa-net) Yet surprisingly, only about one-third of people actually have an advisor, even though 66% feel their financial planning needs improvement. (Napa-net) Meanwhile, demand for comprehensive advice is growing rapidly – more than half of investors (52%) now want holistic financial planning, up from just 29% five years ago . In wealth hubs like Los Angeles (home to one of the nation’s largest concentrations of financial advisors ), it’s more important than ever to know what to look for in an advisory relationship.

How People Are Choosing Financial Advisors Today (and Key Trends)

If you haven’t worked with an advisor before, you might wonder how others find “the one.” It turns out many investors still rely on personal referrals or make quick decisions. In a 2023 survey of high-net-worth advisory clients (all with $500,000+ in investable assets), 57% admitted they hired the first advisor they ever met – meaning they didn’t shop around much. Nearly half of those investors (46%) found their advisor via a referral from family, friends, or colleagues, while another 23% were referred by a professional such as an accountant or attorney. Only 23% found their advisor through online research or social media. (kitces)

Importantly, this is starting to change with younger investors. Clients under 45 were about three times more likely to find an advisor via online sources rather than referrals (kitces). In other words, while older Californians might ask a friend or go with a familiar firm, younger professionals are doing more homework – reading reviews, comparing credentials, and seeking advisors who stand out online. Takeaway: Don’t feel obligated to sign with the first advisor you meet. It’s perfectly okay (in fact, prudent) to research and interview a few candidates to ensure a good fit for your needs.

The Benefits of a Fee-Only, Fiduciary Financial Advisor

One of the first factors to consider is how an advisor is compensated. Advisors can be paid in different ways – some earn commissions by selling financial products, others charge fees for advice (and may also take commissions), and a select group are “fee-only” advisors who only get paid by the client. Why does this matter? Because it directly impacts the advisor’s incentives and legal obligations to you. Commission-based advisors operate under a looser “suitability” standard – their recommendations just have to be suitable (not necessarily optimal) for you. In contrast, fee-only advisors typically act as fiduciaries, meaning they must put your best interests first at all times. The National Association of Personal Financial Advisors (NAPFA) – the leading organization of fee-only planners – states it plainly: the fee-only model is “the most transparent and objective method” of compensation, one that minimizes conflicts of interest and ensures your planner acts as a fiduciary (napfa.org). In other words, a fee-only fiduciary advisor isn’t paid to sell you products; they’re paid to give you advice and manage your finances with your goals in mind, period.

Transparency is a huge benefit of this model. You’ll know exactly what you’re paying (be it an hourly rate, flat retainer, or a percentage fee on assets managed), and you won’t have to worry that your advisor is secretly earning a commission from recommending a certain mutual fund or insurance policy. Fee-only advisors also tend to offer more holistic, unbiased advice – since they don’t profit from product sales, they can focus solely on what strategies work best for you. This structure builds trust and long-term partnership. However, it’s important to note that true fee-only fiduciary advisors are relatively rare in the financial industry. One analysis found that when you count all the brokers, agents, and advisors out there, only about 5% operate as pure fee-only fiduciaries. That number is growing (up from roughly 2% in 2018 (humaninvesting.com), but it shows how special it is to find an advisor who is completely aligned with your interests.

Bottom line: Working with a fee-only, fiduciary advisor means you’re getting someone who is obligated to prioritize you, with no hidden agendas. In California – where financial services are abundant – seeking out a fiduciary is one of the best ways to narrow your choices to advisors who offer full transparency and client-first advice.

Why a CFP® Certification Matters for Your Advisor

You’ll notice many advisors have letters after their name. One of the most respected credentials in this field is CFP®, which stands for Certified Financial Planner™. Choosing a CFP® professional comes with several clear advantages for you as a client:

• Rigor and Expertise: Earning the CFP® mark isn’t easy. Candidates must complete extensive approved coursework (covering investments, retirement, tax, insurance, estate planning and more), pass a comprehensive 170-question, 6-hour exam, and accumulate significant real-world experience. The CFP® exam is notoriously challenging. CFP® professionals also must hold at least a bachelor’s degree and complete 6,000 hours (about 3 years) of financial planning experience (or 4,000 hours in an apprenticeship structure) before they can use the designation. This rigorous training and vetting process gives you confidence that a CFP® advisor knows their stuff and can provide advice across all aspects of your financial life, not just investments.

  
  

• Fiduciary Commitment and Ethics: When you see “CFP®” by an advisor’s name, it also signals a commitment to high ethical standards. CFP® professionals are required by their Code of Ethics to act as fiduciaries when providing financial advice, pledging to put your interests above their own. They must disclose any potential conflicts of interest and are held accountable by the CFP Board (which can sanction those who violate the standards). In short, a CFP® has formally committed to working for your benefit and maintaining integrity – providing an extra layer of trust on top of any regulatory requirements. Not all advisors out there make this promise.

  
  

• Ongoing Education: The financial world changes fast (tax laws, market conditions, new products, etc.), so it’s crucial that an advisor stays up-to-date. CFP® practitioners have to complete continuing education (30 hours every two years) to maintain their certification. This means a CFP® advisor is continually sharpening their knowledge to better serve clients like you.

  
  

• Selectivity and Rarity: Earning the CFP® credential sets an advisor apart in a crowded field. There are over 100,000 CFP® professionals in the United States – which sounds like a lot, but is only about 1 out of every 3 financial advisors (cfp.net). The majority of advisors do not hold the CFP® mark. By choosing a CFP®, you’re opting for someone who has voluntarily met higher standards of education and accountability. It’s a strong signal of professionalism and commitment to the craft of financial planning.

  
  

Overall, working with a CFP® gives you the peace of mind that your advisor has proven expertise and is pledged to put your best interests first. For investors in their peak earning years or approaching retirement (often the case for 35+ professionals in Los Angeles), a Certified Financial Planner™ can provide comprehensive guidance – from creating a retirement roadmap and investment strategy to estate planning and tax-efficient wealth transfers – all under one roof. The CFP® designation is widely considered the gold standard for financial advisors, and for good reason.