'It feels slimy': My friend offered to be my adviser, but didn't tell me he's paid to push financial products. Can I trust him?

MW 'It feels slimy': My friend offered to be my adviser, but didn't tell me he's paid to push financial products. Can I trust him?

By Quentin Fottrell

'His revenue sharing, which he did not disclose, creates conflicts of interest as advisers may be incentivized to recommend funds that pay them more'

"I've had initial consultations with three hourly, fee-based advisors. All of them seemed less engaged compared with the asset-based advisors I've met with." (Photo subject is a model.)

Dear Quentin,

I've typically kept business and personal relationships separate, but a good friend of mine is a CFP advisor at a major U.S. financial advisory firm - we'll call it ACME after the fictional company - and says he operates as a fiduciary. After years of casually discussing finance without taking it further, I finally decided to meet with him and review my situation.

Following his recommendations, I started doing some independent research on both him and ACME. I came across disclosures indicating that the company he represents participates in revenue sharing, and I noticed that many of the firms listed as paying ACME are now being recommended to me by this "CFP fiduciary."

His revenue sharing, which he did not disclose, creates conflicts of interest as advisers may be incentivized to recommend funds that pay them more, rather than those that are strictly in the client's best interest. So I'm left wondering: How is it considered ethical? I don't want to ruin this friendship, but it feels slimy.

How common is this practice across the industry? Or am I overthinking this and going too far down the rabbit hole? I also struggle with the idea of paying more than 1% for advisory services if the adviser may be compensated from multiple sources tied to the same recommendations. I feel genuinely conflicted and would appreciate you poking holes in my reasoning.

For additional context, I've had initial consultations with three hourly, fee-based advisors. All of them seemed less engaged compared with the asset-based advisors I've met. At the same time, I've found online tools often ask me better questions and challenge my thinking more effectively than those advisors did, which makes me wonder: Why not just go it alone?

This situation just feels off to me. I'll also admit I'm sending this from a non-primary email address, as I wouldn't want my name published and risk straining the friendship - especially since I know he reads your work. I also haven't raised any of these concerns with him directly yet. I will wait to hear back from you before doing so.

Creeped Out

Don't miss: 'I'm experiencing issues with arthritis': I'm 68 with $3 million saved. Why am I not ready for a life of leisure?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

Financial advisers are obligated by law to disclose such revenue sharing, and they typically must do this in writing.

Dear Creeped,

It's hard to be objective when he has an incentive to push certain products and services.

That said, incentives are common across the industry - this study puts them at 21% among advisers - and do not automatically imply misconduct. The real issue here is how transparently they are handled and whether they influence recommendations. There are two reasons this feels unsettling: (1) You have not yet seen or heard a clear, prominent disclosure - that may yet happen. And (2) he's a friend who offered his services. So you feel like you are dealing with two people: the man you know and trust and, presumably, as a good friend and the adviser who did not make his interests clear.

Financial advisers are legally obligated to disclose such revenue sharing, and they typically must do this in writing. If you are thumbing through the brochure/paperwork, it will be there in black and white. As you have a trusted friendship with this individual, it feels shady that he did tell you (or has not yet told you) face-to-face. Importantly, disclosure is often delivered through legal documents (Form ADV), so he may have been technically compliant even if his communication is lacking on a personal level.

It's often not a good idea to mix friendship with business. You may be more reluctant to challenge sharp practices or questionable decisions if your financial adviser is also your friend. If you have no personal investment in the individual, you may also be more likely to have careful oversight of your finances. This is actually a perfect example. If you didn't know him personally, would you have challenged him? ("Why didn't you mention this at the outset?") Your hesitation here is evidence of the tension created by the dual role - friend and adviser.

Clearly and prominently

Just so there is no confusion: Financial advisers registered with the Securities and Exchange Commission (SEC) are legally required to disclose if they are being compensated to promote a specific product. They must be transparent about any compensation that could influence their recommendations, ensuring that you, as the client, understand when advice may be influenced by financial incentives rather than being based solely on your best interests. However, "transparent" in regulatory terms does not always mean face-to-face disclosures.

What's more, simply including such important information in a brochure or promotional materials is generally not enough to meet SEC standards. Such disclosures must be "clearly and prominently" provided at the time the recommendation is made - not buried in the small print of legal paperwork - and they must explain the nature of the revenue sharing. This should be presented so that clients can easily see and understand. In practice, many firms rely on written disclosures, which clients perhaps understandably often overlook.

In the SEC's own words: Registered investment advisers (RIAs) have a "duty to disclose conflicts of interest relating to its compensation from both its general fiduciary duty to make full and fair disclosure." This includes practices related to revenue-sharing arrangements. "These examples included the existence of any incentives provided to the adviser or shared between the adviser and others - for example, an affiliate of the adviser."

Complex disclosure rules

The SEC does not necessarily require disclosures to be made in person or delivered verbally. At the same time, it is not enough to rely solely on separate documentation, such as brochures and paperwork made at the 11th hour. They must be provided with both proximity and clarity. In other words, they must be made at the same time as the testimonial or endorsement, whether it's in a brochure, advertisement, video presentation or social media. This creates a gap between adviser compliance and a client's comprehension of all the moving parts.

Law firm Troutman Pepper Locke explains the marketing rule for investors like you. "Compensation for testimonials or endorsements could include such things as offering reduced management fees in exchange for introductions or referrals," it says. "Non-cash compensation could include a private fund manager offering an investor favorable investment terms, such as co-investment rights, in exchange for investor referrals."

Advisers may invest your money in ETFs and/or mutual funds, actively manage your finances, and/or give you overall advice and not even touch your money. Not all money managers are fiduciaries, professionals who must act in their clients' best interest under the Investment Advisers Act of 1940. Find out whether your friend is a member of the Financial Industry Regulatory Authority (highly likely given that he's employed by a major firm). Find out whether your prospective adviser operates under a dual-registered model, where he may switch between fiduciary and nonfiduciary roles depending on the service.

Questions to ask an adviser

Here's the deal: I don't think you should employ your friend as a financial adviser. You don't feel comfortable with his apparent lack of transparency about his revenue sharing, and it's best to keep business and personal relationships separate. Most people have a mortgage or rent to pay and everyone must buy food to put on the table, but I still question a friend who explores their friend group for clients, even if it is common in the industry. For me, it's actually the ickiest part of this whole story. (Others may have less of a problem with friends pitching business.)

The fee-based advisers you contacted lacked engagement, not because they were fee-based advisers, but because they simply lacked engagement. They were individuals who didn't meet your standards for service. So keep interviewing. The 1% fee is worth it if you are getting a heck of a lot more than financial management: tax-advice services, plus regular communication on short- and long-term strategy. It does not guarantee better returns. You should carefully evaluate the total dollar cost over multiple years.

So what questions should you ask a potential adviser? New York Life has a few suggestions: "What services do you provide? Who is your average client? What is your financial philosophy? How do you like to work with your clients? What are your credentials? Can I speak to one of your current or former clients? How do you charge for your services?" The last question should cover whether they work on a salary, fee-based, commission and/or revenue-sharing basis. Conflicts of interest exist, so pay close attention to your comfort level with those conflicts.

Thus far, your own digging has stood by you well.

Related: My in-laws, 95, are leaving us $250K. What's the smart way to invest this money?

More columns from Quentin Fottrell:

'I'm a big fan of DIY investing': I'm 64 and moving to the U.S. I have $2.6 million, but no Social Security. Will I be OK?

'I didn't ask a man to rear-end my car': Social Security is replacing my disability benefits. Will the fund run out of money?

'I'm simply exhausted': I'm 55 and have $1.3 million for retirement. Can I retire next year?

MW 'It feels slimy': My friend offered to be my adviser, but didn't tell me he's paid to push financial products. Can I trust him?

By Quentin Fottrell

'His revenue sharing, which he did not disclose, creates conflicts of interest as advisers may be incentivized to recommend funds that pay them more'

"I've had initial consultations with three hourly, fee-based advisors. All of them seemed less engaged compared with the asset-based advisors I've met with." (Photo subject is a model.)

Dear Quentin,

I've typically kept business and personal relationships separate, but a good friend of mine is a CFP advisor at a major U.S. financial advisory firm - we'll call it ACME after the fictional company - and says he operates as a fiduciary. After years of casually discussing finance without taking it further, I finally decided to meet with him and review my situation.

Following his recommendations, I started doing some independent research on both him and ACME. I came across disclosures indicating that the company he represents participates in revenue sharing, and I noticed that many of the firms listed as paying ACME are now being recommended to me by this "CFP fiduciary."

His revenue sharing, which he did not disclose, creates conflicts of interest as advisers may be incentivized to recommend funds that pay them more, rather than those that are strictly in the client's best interest. So I'm left wondering: How is it considered ethical? I don't want to ruin this friendship, but it feels slimy.

How common is this practice across the industry? Or am I overthinking this and going too far down the rabbit hole? I also struggle with the idea of paying more than 1% for advisory services if the adviser may be compensated from multiple sources tied to the same recommendations. I feel genuinely conflicted and would appreciate you poking holes in my reasoning.

For additional context, I've had initial consultations with three hourly, fee-based advisors. All of them seemed less engaged compared with the asset-based advisors I've met. At the same time, I've found online tools often ask me better questions and challenge my thinking more effectively than those advisors did, which makes me wonder: Why not just go it alone?

This situation just feels off to me. I'll also admit I'm sending this from a non-primary email address, as I wouldn't want my name published and risk straining the friendship - especially since I know he reads your work. I also haven't raised any of these concerns with him directly yet. I will wait to hear back from you before doing so.

Creeped Out

Don't miss: 'I'm experiencing issues with arthritis': I'm 68 with $3 million saved. Why am I not ready for a life of leisure?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

Financial advisers are obligated by law to disclose such revenue sharing, and they typically must do this in writing.

Dear Creeped,

It's hard to be objective when he has an incentive to push certain products and services.

That said, incentives are common across the industry - this study puts them at 21% among advisers - and do not automatically imply misconduct. The real issue here is how transparently they are handled and whether they influence recommendations. There are two reasons this feels unsettling: (1) You have not yet seen or heard a clear, prominent disclosure - that may yet happen. And (2) he's a friend who offered his services. So you feel like you are dealing with two people: the man you know and trust and, presumably, as a good friend and the adviser who did not make his interests clear.

Financial advisers are legally obligated to disclose such revenue sharing, and they typically must do this in writing. If you are thumbing through the brochure/paperwork, it will be there in black and white. As you have a trusted friendship with this individual, it feels shady that he did tell you (or has not yet told you) face-to-face. Importantly, disclosure is often delivered through legal documents (Form ADV), so he may have been technically compliant even if his communication is lacking on a personal level.

It's often not a good idea to mix friendship with business. You may be more reluctant to challenge sharp practices or questionable decisions if your financial adviser is also your friend. If you have no personal investment in the individual, you may also be more likely to have careful oversight of your finances. This is actually a perfect example. If you didn't know him personally, would you have challenged him? ("Why didn't you mention this at the outset?") Your hesitation here is evidence of the tension created by the dual role - friend and adviser.

Clearly and prominently

Just so there is no confusion: Financial advisers registered with the Securities and Exchange Commission (SEC) are legally required to disclose if they are being compensated to promote a specific product. They must be transparent about any compensation that could influence their recommendations, ensuring that you, as the client, understand when advice may be influenced by financial incentives rather than being based solely on your best interests. However, "transparent" in regulatory terms does not always mean face-to-face disclosures.

What's more, simply including such important information in a brochure or promotional materials is generally not enough to meet SEC standards. Such disclosures must be "clearly and prominently" provided at the time the recommendation is made - not buried in the small print of legal paperwork - and they must explain the nature of the revenue sharing. This should be presented so that clients can easily see and understand. In practice, many firms rely on written disclosures, which clients perhaps understandably often overlook.

In the SEC's own words: Registered investment advisers (RIAs) have a "duty to disclose conflicts of interest relating to its compensation from both its general fiduciary duty to make full and fair disclosure." This includes practices related to revenue-sharing arrangements. "These examples included the existence of any incentives provided to the adviser or shared between the adviser and others - for example, an affiliate of the adviser."

Complex disclosure rules

The SEC does not necessarily require disclosures to be made in person or delivered verbally. At the same time, it is not enough to rely solely on separate documentation, such as brochures and paperwork made at the 11th hour. They must be provided with both proximity and clarity. In other words, they must be made at the same time as the testimonial or endorsement, whether it's in a brochure, advertisement, video presentation or social media. This creates a gap between adviser compliance and a client's comprehension of all the moving parts.

Law firm Troutman Pepper Locke explains the marketing rule for investors like you. "Compensation for testimonials or endorsements could include such things as offering reduced management fees in exchange for introductions or referrals," it says. "Non-cash compensation could include a private fund manager offering an investor favorable investment terms, such as co-investment rights, in exchange for investor referrals."

Advisers may invest your money in ETFs and/or mutual funds, actively manage your finances, and/or give you overall advice and not even touch your money. Not all money managers are fiduciaries, professionals who must act in their clients' best interest under the Investment Advisers Act of 1940. Find out whether your friend is a member of the Financial Industry Regulatory Authority (highly likely given that he's employed by a major firm). Find out whether your prospective adviser operates under a dual-registered model, where he may switch between fiduciary and nonfiduciary roles depending on the service.

Questions to ask an adviser

Here's the deal: I don't think you should employ your friend as a financial adviser. You don't feel comfortable with his apparent lack of transparency about his revenue sharing, and it's best to keep business and personal relationships separate. Most people have a mortgage or rent to pay and everyone must buy food to put on the table, but I still question a friend who explores their friend group for clients, even if it is common in the industry. For me, it's actually the ickiest part of this whole story. (Others may have less of a problem with friends pitching business.)

The fee-based advisers you contacted lacked engagement, not because they were fee-based advisers, but because they simply lacked engagement. They were individuals who didn't meet your standards for service. So keep interviewing. The 1% fee is worth it if you are getting a heck of a lot more than financial management: tax-advice services, plus regular communication on short- and long-term strategy. It does not guarantee better returns. You should carefully evaluate the total dollar cost over multiple years.

So what questions should you ask a potential adviser? New York Life has a few suggestions: "What services do you provide? Who is your average client? What is your financial philosophy? How do you like to work with your clients? What are your credentials? Can I speak to one of your current or former clients? How do you charge for your services?" The last question should cover whether they work on a salary, fee-based, commission and/or revenue-sharing basis. Conflicts of interest exist, so pay close attention to your comfort level with those conflicts.

Thus far, your own digging has stood by you well.

Related: My in-laws, 95, are leaving us $250K. What's the smart way to invest this money?

More columns from Quentin Fottrell:

'I'm a big fan of DIY investing': I'm 64 and moving to the U.S. I have $2.6 million, but no Social Security. Will I be OK?

'I didn't ask a man to rear-end my car': Social Security is replacing my disability benefits. Will the fund run out of money?

'I'm simply exhausted': I'm 55 and have $1.3 million for retirement. Can I retire next year?

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March 24, 2026 15:30 ET (19:30 GMT)

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