Red Flags When Evaluating Financial Advising Firms And What To Look For

With dozens of financial firms that you may be evaluating in your career as a financial advisor, keeping an eye out for potential red flags may help you narrow your decision down. While red flags can look different to us all, there are a few that might stand out.

Just like the other firms you are researching, Consolidated Planning offers products that are attainable anywhere for your clients. What is different is putting strategy before products, therefore, providing real value to your clients by being process-first and delivering a financial strategy that is built by financial products, not the other way around.

As you journey through the process of deciding the right financial firm for you, you might pay attention to how products are pitched, what the firm’s quotas look like, their expense model, and who owns the clients, all of which we’ll dive into here so you can make the best decision for the longevity of your career.

4 Red Flags To Look For When Evaluating Firms In Your Career As A Financial Advisor

#1 Product First, Product Last

Starting with a product and ending with a product is a huge red flag if you want to be at a planning firm. If you’re looking to build a meaningful financial advising practice with an emphasis on making an impact in your client’s lives, certainly that won’t start with a product. Starting with a product is very transactional, meaning you will transact, move on, and do it all over again.

A consultative firm will focus on understanding your client’s wants, needs, and goals and working towards financial balance, whatever that may look like for them.

Take the time to understand the revenue mix of the firm and the practice over your first 3-5 years.

#2 Quotas That Don’t Agree With Your Personality

The term quotas in the financial industry is often a daunting term for new financial advisors. And we get that. Find out what your prospective firm’s quotas are. 

• What do these quotas look like?
• What is your gut reaction to learning about these quotas? 
• Will these quotas make you behave in ways you wouldn’t otherwise?

These quotas might be a certain number of assets needed to retain your position at the firm, a certain number of insurance premiums, a certain number of account openings, or a certain number of lives.

Pinpointing your why can help here. Why do you want to be a financial advisor? If your answer revolves around helping people, then quotas that don’t agree with your personality or your beliefs may end up making it harder to build your practice or become a highly transactional financial advisor. If you don’t mind being a transactional financial advisor, that’s ok, and maybe a career with Consolidated Planning isn’t the best fit for you then.

Financial advisors at Consolidated Planning operate under the idea that financial planning is an ever-evolving process, not a one-time event or a push for a certain product.

#3 The Expense Model

As a financial advisor, your biggest “start-up” costs may be your licensing. Other than that, you really shouldn’t have to spend much of your hard-earned money with a firm. 

Some firms may charge you an overhead cost for space, which should also lead you to question if you’re required to work from the office. In addition to office space, you might be charged for technology and other aspects within their expense model as a financial advisor. In some cases, this may be sizable over time. This is an important piece to find out during your interview process, not down the line.

#4 Who Owns The Clients

Last, but certainly not least, who owns your clients? Well, are they your clients?

Building your financial advising practice takes time (a lot of time), energy, and resources, all of which should result in you owning your clients. This red flag is an easy item to evaluate but most of the time it’s not asked by the interviewee and it’s not disclosed by the firm.

If you don’t own your clients, but the firm does, you’re effectively building a practice for someone else. Not owning your clients means you can’t have a succession or exit plan in place for your years or decades of hard work and dedication to your clients.

What Should You Look For In A Financial Firm?

Along with what you might not want in your career as a financial advisor, you should also take inventory of what you want as a financial advisor.

Do you want a transactional career with a transactional firm?

Do you want a consultative career with a consultative firm?

With a consultative financial planning firm, people are often prioritized over products. People, not just clients, but also internal clients, you, the financial advisor will be prioritized. This might look like having a clear path to develop, with a beginning and an end, with success being easily defined by the firm.

A culture of support and helpfulness will be at the forefront of the firm where you can build a successful and meaningful practice for you and your clients. Ask yourself, how do you want to be treated as a consumer?

If you find yourself still evaluating firms with some of these red flags, it might be time to take the next step and reach out to the recruiters at Consolidated Planning. As a process-based, people-first firm, you will take a consultative approach, understand fully what success looks like with us, and own the practice that you spent countless hours and energy building.

2023-149295 Exp. 1/2025