10 Questions To Ask a Financial Advisor
Whether you’re just starting your career, nearing retirement or somewhere in between, a financial advisor can help you navigate important decisions about your money. Financial advisors come with an array of backgrounds, so it’s important to know how to choose the right advisor for you.
When evaluating a financial advisor, you should research their education and experience. You also need to schedule an appointment to talk about their services and how they can assist you. Knowing what questions to ask during the interview helps you get the answers you need so you can find the best financial advisor for you.
What To Ask Yourself Before Seeking a Financial Advisor
Before you start interviewing financial advisors, take some time to define your goals. Ask yourself, “What are my financial goals and what do I need help with?” The answer to this question will help you figure out what kind of professional assistance you need and what to ask a financial advisor during the interview. Besides investments and taxes, other matters to consult with a financial advisor about include higher education, retirement and insurance.
10 Questions To Ask a Financial Advisor Before Hiring Them
The best way to evaluate a financial advisor before you hire them is to ask questions about their experience and values. Their answers to the following questions provide insight into the way a financial advisor works so you can select the person who meets your needs.
1. What Are Your Qualifications?
Start with the basics and ask about licensure and certifications. Federal and state laws require practicing advisors to be licensed or registered, and some financial planning specialties also call for additional coursework and exams. By asking this question, you’ll understand the type of work each financial advisor does and gain reassurance about their qualifications.
2. Are You a Fiduciary?
One of the most important questions to ask a financial advisor is if they work as a fiduciary. A fiduciary is legally obligated to act in the best interest of the client. Working with a fiduciary gives some investors peace of mind. They trust their advisor to suggest products that benefit the client and don’t just pad their commission check.
3. Do You Have Any Disclosures on Your Record?
A financial advisor with a history of complaints and disciplinary action is not a good pick. Check with the Securities and Exchange Commission, the Financial Industry Regulatory Authority and your state regulators to review the background of financial advisors you’re considering. Be wary of anyone who has broken the law or violated guidelines in the past.
4. What Services Do You Provide?
Financial advisors offer services ranging from one-time financial plan reviews and consultations to active investment management. They also may concentrate their services on a particular sector, like investments or money management. The financial advisor you choose should offer services that meet your current needs and goals.
5. What Types of Clients Do You Specialize in Serving?
Asking this question will help you find a financial advisor who is experienced in providing assistance with the specific financial goals you have. For example, if you’re looking for help with retirement planning, you should find out if the financial advisor has experience assisting retirement-planning clients.
Or if you’re looking for a way to plan for higher education costs, you’ll want a financial advisor who is well-versed in such matters. The SEC also recommends asking a potential financial advisor for names and numbers of long-term clients to find out more about the quality of services he or she provides.
As an alternative, you can ask the advisor to tell you about results he or she has gotten working with customers in a similar financial situation to you.
6. How Are You Paid?
Financial advisors are paid in one of three models: commission-based, fee-only or a combination of the two. The National Association of Personal Financial Advisors prohibits its members from accepting commissions. This increases transparency and reduces the chance that an advisor will recommend products that may not be the best fit for the client.
7. What Will Be My Total Cost To Work With You?
After you find out how the financial advisor is paid, it’s important to also ask about the total cost of services so there are no surprises. Ask whether the financial advisor will give you a statement that details all fees and commissions and if you will be able to easily understand the breakdown of those costs.
8. What’s Your Investment Philosophy?
A financial advisor’s investment philosophy can give you insight into how he or she will handle your investments and allow you to determine whether that philosophy will align with your risk tolerance. For example, you’ll want to know if the advisor favors using a research-driven approach to make investments or a speculative — stock-picking — approach.
9. How Often Do You Communicate With Clients?
Communication is the key to any successful relationship, including the one you have with your financial advisor. You want someone who attends to your needs and answers your questions. Find out how often your financial advisor plans to be in touch with you and how you can reach him or her as needed.
10. Will You Be Able To Explain To Me How Your Investment Decisions Relate to My Overall Financial Goals?
When you meet with your financial advisor, you’ll want to get the most out of it. A good financial advisor will have a solid investment strategy in mind for each client, which is shaped by first learning about each client’s goals. When a financial advisor understands your financial goals, he or she will be able to make tailored investment decisions to help you meet those goals and also be able to justify those decisions.
How To Find the Best Financial Advisor for You
Sometimes you won’t need to go to all the legwork to interview a financial advisor. For example, if you’re only interested in investing a smaller amount of money, you may choose a robo-advisor or a hybrid robo-advisor, which will allow you to also consult with a human financial advisor as needed for specific questions.
Another option is a financial advisor who works virtually. These types of advisors may specialize in a certain niche, which can make them perfect if you’re only interested in a specific service, such as retirement planning or estate planning.
If you need someone who will provide comprehensive financial planning services and who you can meet with in person, start your search by putting together a list of potential local candidates.
Ask family and friends for recommendations and browse professional organization websites that maintain a database of local financial advisors. Evaluate potential candidates by reviewing their websites, checking their credentials and interviewing them in person. With due diligence, you will find a financial advisor who’s worth it.
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- Investment Adviser Public Disclosure. " Investment Adviser Public Disclosure."
- U.S. Securities and Exchange Commission. "Ask Questions"
- U.S. News. 2021. "Questions to Ask Advisors on Their Investing Strategy."
- Fidelity. "What Is a Robo-Advisor? | Robo vs Hybrid Robo-Advisor."
- Wealthtender. "What Is a Virtual Financial Advisor (and Why You Should Consider Hiring One)."