10 Key Questions To Ask A Financial Advisor

Managing your money well can be done on your own, but seeking the help of a financial advisor can also be useful. This professional can help you achieve goals that you may not have considered before, and can be a neutral third party when it comes to assessing your current finances.

Before hiring an advisor, it’s important to speak with a few in order to determine the right fit. To help you make an informed decision, it’s key you ask the right questions to assess whether this person will help you with your financial goals.

Financial Advisor Basics

A financial advisor can encompass many roles, but the main goal is to help you achieve your financial goals. Although any financial advisor should be able to help a client set short- and long-term money goals, each one varies in their specialty. Some advisors specialize in wealth management, some in investment advice and others in credit. Or some can help advise you on how to choose the right types of insurance as part of your overall estate planning, or outright manage your portfolio as your investment manager.

When choosing a financial advisor, you’ll want to start by thinking about your goals for the future and your current financial situation. Knowing where you’re at and where you want to be can help you choose an advisor who aligns with your goals.

Reasons To Use A Financial Advisor

Some common reasons people use a financial advisor when it comes to their money goals include:

• Looking over personal finances to determine whether someone is ready for a life transition (like retirement or starting a family)
• Learning how to manage distributions from investments after retirement
• Review household spending and saving patterns
• Offering guidance on where you allocate your money in your investment portfolio
• Guidance on how to save for short- and medium-term goals, like buying a house
• Helping to make educated decisions alongside other financial professionals like tax advisors

Cost

Fees for working with a financial advisor can range from several hundred or thousands and more. Depending on the services and how long you need them, as well as the advisor, you may be paying a flat fee or a percentage based on your investment amount. You could also be charged a commission depending on the products you purchase or invest in (the financial advisor could also receive a commission instead from the company you purchase a financial product or investment from). Whatever the charges are, it’s important to understand

10 Financial Advisor Interview Questions You Need To Ask

During your first meeting, consider the following financial advisor interview questions you can ask to assess a good fit.

1. What Are Your Qualifications?

Financial advisors often carry a long list of abbreviated letters after their name and title, and each one offers some insights in their specialties or training.

Some of the most common financial advisor accreditations include:

• Certified Financial Planner (CFP): Accredited by the Certified Financial Planner Board of Standards, these professionals have completed educational training, passed an exam and have extensive financial planning experience. These financial experts are considered fiduciaries.
• Chartered Financial Consultant (ChFC): ChFC is a financial planning certification issued by the American College of Financial Services that serves as an alternative to a CFP. There is some overlap between earning a CFP and a ChFC, but a ChFC allows advisors to receive slightly more specialized training than those with a CFP.
• Chartered Financial Analyst (CFA): These individuals are accredited by the CFA Institute. and have logged substantial work experience in a variety of specialized financial services. Earning a CFA is sometimes a requirement to hold important investment-related positions at public companies or firms.

Beyond their accreditations, it’s also important to uncover what other qualifications make them the right candidate for the job. How long have they been a financial advisor? What do their clients have to say about them?

2. Are You A Fiduciary?

A fiduciary is someone who is legally and ethically required to keep the client’s best interests in mind when giving financial advice. Because they handle the money and assets of their clients, a certain level of trust is needed with these relationships. Among other requirements, fiduciaries need to clearly state any conflicts of interest that might arise so that the advisor’s ability to serve the client is never impacted.

Make sure your financial advisor follows this fiduciary standard – you should be able to ask them about this and get your answer in writing.

3. How Do You Get Paid?

Don’t hesitate to ask your prospective financial advisor how much their services will cost you and if it will be a fixed fee or an hourly fee. To get a better idea of what it may cost to work with an advisor, look into their method of charging clients.

It’s common for advisors to use a variety of fee structures, which includes:

• Fee-only: May charge a flat fee for various services but does not receive commissions.
• Commission-based: Receives commissions for recommending products.
• Fee-based: Charges fees for their various services, but may also collect commissions.

4. What Services Do You Offer?

It’s important to consider what you’re looking to get out of your time working with a financial advisor. Do you need more comprehensive wealth management advice, or do you have retirement planning, trust, or estate planning concerns? Are you wondering how to pay for your child’s education and want to learn more about 529 savings plans? The stage of life you are in can determine the right financial products to focus on and how strategic your investment management should be.

5. How Often Will We Communicate?

You want a financial advisor who meets your needs communication-wise and keeps you up to speed on what you need to know. Ask how many other clients they advise to help you gauge how busy they are and the level of dedication they will be able to provide. How often will they update you on changes with your plan? How often will you have scheduled appointments to check in on goal progression, get important questions answered or make financial decisions?

6. Are You Primarily A Financial Advisor Or Investment Advisor?

A financial advisor is someone who can assist you with a wide variety of personal financial decisions and goal setting. Many financial planners, brokers, accountants and other professionals can be considered financial advisors. On the other hand, investment advisors deal largely with investing and stock brokerage decisions. This could be basic portfolio building or more high-level investment strategies and real estate.

7. What Is Your Investment Philosophy?

Whatever the state of the market, the right financial advisor will make the best decisions possible for all types of clients. But it’s important for you to work with one that aligns with your investment philosophy. Will they stick it out when the going gets tough, or will they sell to make a quicker profit?

Ask about the important considerations they take when making financial decisions on your behalf. You’ll want to know how they plan to diversify your portfolio, if they favor growth or value, types of investments they will make and the market timing they feel is right to invest.

8. Where Will You Keep And Manage My Assets?

Using a third-party custodian (like major brokerage companies) helps prevent advisors from gaining too much power and control over your accounts. These parties will also provide consumers with FDIC and SIPC insurance to further protect their assets and investments.

9. What Resources Will I Have Access To While Working With You?

Having access to financial educational resources and recent market news that can provide you with clarity can help you make more informed decisions and take better control of your future.

You should also inquire with your prospective advisor regarding what tools they have available in case you are unable to meet in person. Virtual resources or online portals where you can access your portfolios can be useful.

10. How Will My Performance Be Tracked As We Progress?

What does your advisor view as a success? How do they evaluate your progress? You’ll want an advisor who regularly tracks your progress against your short and long-term goals. A good advisor will be able to evaluate your progress against any changing market conditions, risk tolerance or volatility.

Red Flags To Look Out For When Evaluating Personal Financial Advisors

When interviewing potential financial advisors you want to work with, it’s just as important to spot signs this professional isn’t a good fit.

Some red flags to watch out for include:

• Only talking about short-term returns on investments
• Not showing you their qualifications
• They brag about their accomplishments
• They don’t have a transparent online presence
• There are disclosures on their records
• They take too long to reply or are unresponsive
• They’re pushing products like annuities without seeming like they consider your situation

Finding A Financial Advisor FAQs

Consider the following most commonly asked questions when it comes to finding a financial advisor.

How do I prepare for a conversation with a financial advisor?

You can prepare for a conversation with a financial advisor by compiling questions based on what you want in a professional. You’ll also want to come up with your financial or life goals you hope to achieve with their assistance.

How much money should I have before seeing a financial advisor?

There is no right or wrong amount of money you should have before seeing a financial advisor. However, some will only work with individuals who have a certain net worth or assets, so do your research to make sure your financial situation matches what the financial advisor can help you with.

What should I ask my financial advisor each year?

You should review your initial financial goals and see how you are progressing in terms of whether you’re closer to reaching them. Other questions you can ask include advice for any changing life circumstances or other ways to maximize your financial situation.

The Bottom Line: Learning How To Evaluate A Financial Advisor Is Key

When choosing a financial advisor, it’s okay to be picky. After all, they are advising you on major financial decisions. Making sure that they are serving you with the best possible intentions will help you work together to create a successful financial plan.

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