How to compare a relative's financial adviser with other options

A parent, aunt or sibling may suggest that you talk to the financial adviser they already use. That introduction can be useful. It is also a relationship you did not choose yourself, so it deserves the same comparison you would give any other option.

This US guide gives a neutral way to compare that adviser with one or two alternatives. It does not recommend any adviser, tell you what to do with money or accounts, or explain taxes or transfers.

Editorial scenario. This page imagines someone who has been offered an introduction to a relative's existing adviser. That scenario is ours. The comparison steps below draw on public SEC and FINRA material, which does not address this family situation.

Key takeaways

• A relative's good experience tells you about their experience. It does not replace reading the firm's own documents.
• Compare the same five things for every option: services, fees, conflicts, how the professionals are paid and disciplinary history.
• Check the person and firm in public databases yourself, not from a name someone gives you.
• You can compare without committing. Asking for documents is a normal first step.

Separate the introduction from the evaluation

A family introduction usually comes with trust already attached. Your relative may like the adviser's communication and may have been satisfied for years. Those are real points of information, but they answer a different question from whether the services and costs fit you.

Write down two lists before the first call. One list is what your relative told you. The other is what you can confirm from documents. Keep them apart when you compare.

The five things to compare

Under SEC rules, broker-dealers registered under section 15 of the Securities Exchange Act and investment advisers registered under section 203 of the Investment Advisers Act must give retail investors a short relationship summary, called Form CRS. For this purpose, a retail investor is an individual, or that person's legal representative, seeking services mainly for personal, family or household purposes. Ask each firm whether it provides one to you. Firms use a common set of required sections, although headings differ for broker-dealers, advisers and firms registered as both. That common structure is what makes a side-by-side comparison practical.

• Services. Form CRS asks the firm to say whether it offers brokerage services, advisory services or both, the principal services, and any material limitations.
• Fees. The form asks for the principal fees and costs, how often they are charged and the conflicts they create. Broker-dealers describe transaction-based fees. Advisers describe asset-based, fixed or other direct fees.
• Conflicts and standard of conduct. The form asks the firm to describe its legal standard of conduct and other ways it makes money where they apply, such as proprietary products, third-party payments, revenue sharing or principal trading.
• How the professionals are paid. The form asks how the firm's financial professionals are compensated, including cash and non-cash compensation, and the conflicts that creates.
• Disciplinary history. The form asks whether the firm or its financial professionals disclose, or are required to disclose, legal or disciplinary history.

What changes when the adviser is a family connection

This section is editorial. It is not drawn from SEC or FINRA guidance.

• Shared history. Your relative may have told the adviser things about family finances. Ask what the adviser can and cannot discuss with you, and let your relative decide what to share.
• Pressure to say yes. Declining a relative's adviser can feel awkward. Comparing two or three options and saying so plainly makes the choice about documents, not loyalty.
• Different needs. Your relative's goals, assets and stage of life may differ from yours. Ask whether the services described match what you need, not what your relative needs.

Check the adviser yourself

The SEC's Ask and Check guide describes Investment Adviser Public Disclosure (IAPD) as a tool for researching firms and individuals, and describes FINRA's BrokerCheck as a free tool for researching them. IAPD covers SEC- and state-registered advisers, and BrokerCheck covers FINRA-registered brokers and firms. The guide notes that each tool can point you to the other when the information you want is held there.

FINRA's guidance also suggests asking about registration and disciplinary actions, and comparing the answers with what you find in BrokerCheck and other third-party sources.

Use the name and firm from the adviser's own documents, not only the name your relative gave you. Do not send private financial records to anyone before you have checked who they are.

Questions to take to the first conversation

The general meeting questions are in How to prepare for a first financial advisor meeting, and the service-scope questions are in One-time planning vs ongoing advice. Add these that are specific to a family introduction:

• Do you work with me and my relative under separate agreements? Which documents apply to me?
• Is anything about how you are paid different when a client is referred by another client?
• Which of your answers can I confirm in IAPD or BrokerCheck?

What this page does not do

This page does not say whether any adviser is right for you, whether to move or sell anything, or what the tax effects might be. It cannot tell you whether a relative's adviser is better or worse than another option. Documents and public records give you information to weigh, and the decision remains yours.