10 Questions to Ask a Prospective Financial Advisor

Planning your financial future or selecting the best investments to achieve your goals can be a daunting task and one that you want to get right the first time. Getting the right help can not only save you time and money, but it can also help you achieve better results faster. However, never forget that even if you choose to work with an advisor, you are ultimately responsible because you are the one who will have to live with the result, so always plan to be an active participant in the process.

Before starting the process of choosing a financial advisor, determine the type of help you need. For example, do you need general financial planning advice, advice for a specific goal such as retirement, or do you want someone to give you a second opinion regarding your plan or investments? Once you determine the type of help you are looking for, you can narrow your search and look for advisors that specialize in those areas.

Start by asking friends, family, and other professionals for referrals. You can also check with financial associations such as the CFP*, NAPFA**, and the FPA***. Plan to interview at least three financial professionals before making a decision. Before scheduling interviews, prepare a list of questions to ask, including questions about the types of clients they work with, their education/credentials, and work history. During the interviews be prepared to discuss your specific needs as well as information about you so you can also determine if you are a good fit.

Here’s a checklist of some basic questions to ask when interviewing prospective financial advisors. If you have special needs or concerns, be sure to include questions about these as well. Also, take a pad and pen to write their responses and your impressions during the interview.

Sample questions:

  1. Are you a fiduciary? A fiduciary is someone who is bound by law to put your interests ahead of theirs when making decisions and recommendations. Someone who is not a fiduciary could also do the same, but they have no legal obligation to do so.
  2. How do you get paid? Advisors are paid in one of three ways: fees, commissions, or a combination of these. There are good and bad advisors in each category. The important is thing to understand how they get paid and how you pay them. That is, do you pay them directly or are fees deducted from your accounts? If fees are deducted from your accounts, how much and how often?
  3. What is your background? Ask questions about training, education, licenses, and credentials. You are looking for someone you feel has the understanding to help you with your specific needs. For example, if retirement is your main concern, look for advisors that specialize in retirement planning.
  4. Do you have clients like me? Ask if the advisor has worked directly with people who have your specific need, in your age/income/net worth category, etc. If so, ask for specific examples.
  5. How will our relationship work? Find out what you can expect in terms of plans, meetings, reviews, etc.
  6. What are my all-in costs? Ask about the typical costs associated with the types of services you need. Note: Before you sign with an advisor, get something in writing that spells out the services they will provide and their fees.
  7. How often do you communicate with clients? Ask how often can you expect to receive communications from them and the best way to contact them.
  8. How will you invest my money? Do they have set portfolios or are they customized for each client?
  9. How do you choose investments for clients? A good answer here is that they choose investments based on your goals, risk tolerance level, and the timeframe when you will need the money. Be suspicious of advisors who don’t use any of these criteria or who must use only proprietary investment options.
  10. Close the interview by asking if there is anything else you should know, such as questions you should have asked but didn’t? Review your notes from the interviews and add your thoughts regarding his/her competence, interest in taking you on as a client, and whether he or she is a person you trust and can work with. Then do your homework, including checking out any references you may have been given, and verifying credentials through the Financial Industry Regulatory Authority (FINRA)****. Once you have all of the information, make your decision and schedule an appointment.


*CFP – Certified Financial Planner – www.cfp.net
**NAPFA – National Association of Personal Financial Advisors – www.napfa.org
***FPA – Financial Planning Association – www.financialplanningassociation.org
****FINRA – Financial Industry Regulatory Authority (FINRA) – Broker Check Hotline (800) 289-9999 –   www.finra.org
Note: This is also the organization where you can register complaints if you have a problem with a financial advisor or broker.