How to Check if a Financial Advisor Is Independent: 5 Tests

The word sits on the first slide of every pitch. The private bank’s planning team is “independent of product”. The multi-family office a friend recommended is “fully independent”. The boutique your lawyer introduced calls itself an independent family office advisor. Three firms, one word, three ways of being paid. This guide shows how to check if a financial advisor is independent without taking anyone’s word for it, including ours.

Independence is a licence status, a pay structure and a set of documents, and each either exists in writing or does not. In some countries the word is protected by law; in others it is marketing. Five tests settle it in an afternoon: the register, the written declaration, who pays, the documents and the red flags. If you are still deciding whether you need an advisor at all, read do I need a private wealth advisor; for comparing firms on more than independence, see how to choose a wealth advisor and our shortlist of family office advisory firms.

How do I verify that an independent family office advisor is genuinely independent and does not receive commissions or referral fees?

Run five checks; get each answer on paper. Find the firm on the regulator’s register by its reference number. Get a signed statement that it keeps no retrocessions, placement, referral or trailer fees from anyone. Ask who pays it, and how much in euros. Read its fee schedule, inducements and conflicts policies. Treat anything free as a sales process.

Test 1: how to check if a financial advisor is independent on the regulator’s register

A licence proves permission, not independence. But no licence, where one is required, ends the conversation. Search by the firm’s reference number, not its name: trading names, group companies and clone firms are common. The FCA flags firms that falsely claim to be authorised, and the CNMV publishes warnings about unauthorised entities. On the entry, check that the legal entity is the one signing your engagement letter, that its status is current, and that its permitted activities include investment advice.

How to check if a financial advisor is registered

Portugal. The Securities Code (Código dos Valores Mobiliários, CVM) makes autonomous investment advice depend on CMVM authorisation (art. 301.º n.º 1) and requires the CMVM to publish who is registered and whether each acts as independent (n.º 5). Only those registered or notified as independent may use the designation consultor para investimento independente, and they may not provide other investment advisory services (n.º 8). A bank or broker is a financial intermediary, not an autonomous advisor, so this list will not show it; ask it for the declaration in Test 2.

Spain. An empresa de asesoramiento financiero (EAF) is a legal entity authorised by the CNMV to provide only investment advice and certain ancillary services, and it may never hold client money or securities (Ley 6/2023, art. 128.1.d). The label says nothing about independence. The CNMV’s own guide says the firm must tell you whether its advice is independent, and the nature and amount of any incentives or retrocessions it may receive from banks or fund managers.

Switzerland. The Financial Services Act (FinSA) has no “independent advice” label; the test is third-party compensation, in Test 4. FINMA warns that an institution may be authorised but not yet listed.

UAE. The DIFC and ADGM run separate regimes, distinct from the EU. Ask the firm which rulebook applies to you and request its inducements disclosure in writing.

The register tells you a firm may advise you. It does not tell you who else pays it.

Test 2: the written independence declaration (MiFID II)

How do I know if a financial advisor is independent? In the EU, you ask, and the firm must answer first. MiFID II (Directive 2014/65/EU) Art. 24(4)(a) requires it, in good time before giving investment advice, to say whether the advice is independent and whether it rests on a broad or a more restricted analysis of financial instruments.

Independence carries two conditions. Under Art. 24(7)(a), the firm must assess a sufficient range of instruments available on the market, not limited to those issued or provided by itself, by entities with close links to it, or by others whose legal or economic ties could impair its independence. Under Art. 24(7)(b), it may not accept and retain fees, commissions or monetary or non-monetary benefits from any third party in relation to the service, apart from clearly disclosed minor non-monetary benefits. Art. 24(8) applies the same ban to portfolio management, which is what a discretionary mandate is.

Everyone else works under Art. 24(9): third-party payments must be designed to enhance the service, must not impair the duty to act in your best interests, and must be disclosed beforehand. Delegated Directive (EU) 2017/593, Art. 11(2), sets the quality test: the payment must fund an additional or higher level of service to you and must not benefit the firm without a tangible benefit to you. The most common such payment is a retrocession: the share of a fund’s management fee paid back to the bank or advisor that placed you in it.

For independent advice and portfolio management, Art. 12(1) of the same Delegated Directive closes the loop: any third-party fee received must be transferred to you in full, as soon as reasonably possible, and you must be told about it. As a directive, MiFID II reaches you through national law; in Spain, the same rules sit in Ley 6/2023 (arts. 214 to 216).

What you want is one signed sentence in the engagement letter. A version your lawyer can adapt:

“We provide investment advice on an independent basis. Neither we nor any entity linked to us retain any fee, commission or other benefit from any third party in connection with our services to you, other than disclosed minor non-monetary benefits. Any such payment received is transferred to you in full.”

A firm that calls itself independent but will not sign that has answered the question.

Independent vs restricted advice

The UK has its own vocabulary. Under the FCA’s COBS 6.2B, “independent advice” must cover a sufficient range of relevant products, diverse by type and by issuer, and not limited to the firm’s own or closely linked products (COBS 6.2B.11R). Anything else is “restricted advice”. The firm must tell you which you are getting, using those words, before it advises (COBS 6.2B.33R), and a firm offering both may not let the same individual give both (COBS 6.2B.29R(4)). For personal recommendations on retail investment products, the firm may be paid for the recommendation only through charges the client pays, not commissions from product providers (COBS 6.1A.4R).

Test 3: how wealth advisors get paid, and who pays the commission

Do financial advisors get commission? Many do, lawfully. What matters is that you know every source, and whether the applicable rules let the advisor keep it.

How do wealth advisors get paid, then? Usually by a mix of these rows. Only the first two come from you alone, and even a percentage-of-assets fee carries a structural conflict: advice to repay a loan, buy property or hold cash elsewhere lowers the advisor’s income. That is arithmetic, not a moral failing; a flat fee removes it. Referral fees matter most in cross-border structures, where the lawyer, trustee and bank recommended to you may have introducer agreements with each other; that is how wealth planning and structuring decisions get quietly shaped. The same pay map is the first step of investment and wealth management oversight.

Fee-only vs fee-based

These are US industry labels, not legal categories. “Fee-only” means paid only by the client, with no commissions; “fee-based” usually means a client fee plus commissions on products sold. US firms describe their pay in SEC filings (Form ADV and Form CRS), and US readers will also hear the word “fiduciary”. In Europe, neither label carries legal weight; the declaration in Test 2 does.

Twelve questions to ask a wealth manager, in writing

Send these by email and ask for a written reply, not a call. They work for a private bank, a multi-family office or a one-person firm.

Test 4: the documents to request

Answers in an email are a start. The documents show whether the firm runs the way it says, and a MiFID firm should already hold most of them.

On the Swiss clause: FinSA Art. 26 lets a provider keep third-party compensation only if it told you its type and scope in advance and you relinquished it; otherwise it must pass it on in full. On request, it must disclose the amounts actually received. Ask every year. How to read a costs report is in the retrocession entry; how the lines add up at a bank is in our guide to private banking fees.

Test 5: financial advisor red flags

None of these proves a conflict alone. Each is a reason to ask for the answer in writing.

• “The review is free.” Someone pays for the analyst’s time; if not you, then the product it recommends. A free portfolio review is a legitimate sales process, not an independent one.
• “The provider pays us, so it costs you nothing.” It costs whatever the provider builds into the product.
• Percentage-of-assets pricing with no flat-fee option and no cap. The fee grows with the assets, not the work.
• The firm’s own or a sister company’s products in the proposal. Fine if disclosed; incompatible with independence if they are the whole range.
• Introducer agreements with the bank or law firm it recommends. A firm with none can say so in one line.
• “Independent” in the brochure, no register entry for the signing entity.
• Reluctance to answer in writing. A call is a fine first step and a poor last one.
• Fees only as a percentage, never in euros.

The case of a founder with four banks and eleven entities shows several unchecked advisors from the inside. If you pay several and have never run these tests, the fastest first step is a Wealth Operations Review.

What “independent” means in each jurisdiction

The EU rules will change, but not yet. The Retail Investment Strategy, provisionally agreed by the European Parliament and the Council on 18 December 2025, introduces a new inducement test. As of 20 October 2026 it is not law: Coreper confirmed the agreement on 8 June 2026, the Parliament’s economic affairs committee approved the text on 23 June 2026, the plenary vote is listed for 11 November 2026 as an indicative date, and nothing has been published in the Official Journal. Member States will then have 24 months to transpose it, according to CMS.

How PWA answers its own five tests

The same tests apply to us. PWA is paid by the family, and only by the family. It receives no retrocessions or referral fees from any bank, manager or platform, and sells no products. When a lawyer or accountant commissions a Review for a client, the invoice goes to the family and nobody is paid a referral fee. PWA does not manage money, hold mandates, take commissions or give regulated investment, tax or legal advice. Tests 1 and 2 therefore do not fit us in the usual way. Where a decision needs a regulated view, the Review names the question and the kind of advisor to ask, and that advisor should pass all five tests.

Questions we hear

How do I know if a financial advisor is independent?

Ask the firm, in writing, whether its advice is independent; in the EU it must tell you before advising. Then check the regulator’s register, confirm that no commissions, retrocessions or referral fees are kept, and read the fee schedule and inducements policy. If any answer exists only in conversation, treat the advisor as not independent.

Do financial advisors get commission?

Many do. In the EU, an advisor giving non-independent advice may receive commissions from product providers if the payment is designed to improve the service and is disclosed beforehand. An advisor giving independent advice, or a portfolio manager, may not keep them: any third-party payment must be passed to the client in full.

How do wealth advisors get paid?

In one of five ways: a flat or hourly fee paid by the family; a percentage of assets under advice; retrocessions or trailer fees from funds; placement fees on private deals and structured products; and referral fees from banks, lawyers or platforms. Only the first two come from you alone. Ask which apply, with the total in euros.

What is the difference between fee-only and fee-based?

Both are US industry labels, not legal categories. A fee-only advisor is paid only by the client, through a flat, hourly or asset-based fee, and takes no commissions. A fee-based advisor charges the client a fee and may also earn commissions on products sold. In Europe, the closer test is whether advice is declared independent under MiFID II.

How do I check if a financial advisor is registered?

Search the regulator’s public register with the firm’s reference number, not just its name: the CMVM in Portugal, the CNMV in Spain, the FCA register in the UK, FINMA’s lists in Switzerland, and the DFSA or ADGM FSRA registers in the UAE. Confirm that the legal entity, status and permitted activities match the contract you will sign.

Can a private bank give independent advice?

Yes, in the EU, if the service meets the MiFID II test: it assesses a sufficiently diverse range of instruments not limited to the bank’s own or closely linked products, and passes any third-party payments to the client in full. A bank may also offer non-independent advice, declared as such. Ask which one you are receiving, in writing.

Sources

All pages opened and checked on 19 October 2026; the Legislative Observatory, FCA Handbook and FCA Register pages rechecked on 20 October 2026.

• EU, Directive 2014/65/EU (MiFID II), 15 May 2014, Art. 24(4)(a), 24(7)–(9). Read on legislation.gov.uk’s copy of the EU text. legislation.gov.uk · eur-lex.europa.eu
• European Commission, Delegated Directive (EU) 2017/593, 7 April 2016, Art. 11(2) and 12(1). Art. 11 · Art. 12
• European Commission, Delegated Regulation (EU) 2017/565, 25 April 2016, Art. 34(1) and 50, as adopted. Art. 34 · Art. 50
• European Parliament, press release, 18 December 2025: provisional deal and new inducement test. europarl.europa.eu
• European Parliament, Legislative Observatory, 2023/0167(COD): Coreper 8 June 2026, committee 23 June 2026, indicative plenary 11 November 2026, no final act. oeil.europarl.europa.eu
• CMS, legal update, 19 December 2025 (law-firm analysis): 24 months to transpose. cms.law
• FCA Handbook, COBS 6.2B, updated 6 April 2026 (6.2B.11R, 6.2B.29R(4), 6.2B.33R), and COBS 6.1A.4R. COBS 6.2B · COBS 6.1A
• FCA, “Financial Services Register”, updated 13 February 2026. fca.org.uk
• Swiss Financial Services Act (FinSA), SR 950.1, Art. 26. Read on the droit-bilingue.ch reproduction; binding text on Fedlex. fedlex.admin.ch
• FINMA, “Authorised institutions, individuals and products”. finma.ch
• Código dos Valores Mobiliários, art. 301.º, version in force since 30 January 2022 (Lei n.º 99-A/2021), consolidated text. informador.pt
• Ley 6/2023, de 17 de marzo, consolidated text, BOE: arts. 128.1.d, 214–216. boe.es
• CNMV, “Empresas de asesoramiento financiero. EAF. Guía rápida” (undated). cnmv.es
• CNMV, official registers of investment firms (EAF, EAFN, warnings). cnmv.es
• DFSA public register; ADGM FSRA public register. dfsa.ae · adgm.com

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Pedro Souto is the founder of PWA — Private Wealth Advisory. He works with UHNW founders, families, and single-family offices to build an independent operating layer around complex wealth — combining markets, analytics, technology, and governance to turn fragmented advice into one coherent picture, and to make someone, finally, responsible for the whole of it.