If you’re looking for a financial advisor, you may be feeling overwhelmed by all the choices. How do you know which advisor is right for you? And what questions should you ask them? Asking the right questions will ensure that you find someone who is a good fit for your needs.
Table of Contents
- Your Need Comes First Before Asking
- 1. What Are Your Qualifications?
- 2. Are You a Fiduciary?
- 3. What Service Do You Provide?
- 4. What Are Your Areas of Expertise?
- 5. How Long Have You Been Helping Clients?
- 6. What Kind of People You Specialize in Working with and How Many Clients Do You Have?
- 7. How Do You Charge for Your Services?
- 8. What is Your Fee Structure?
- 9. How Often Do You Provide Advice?
- 10. Where Do You Keep My Money and How Can I See it?
- 11. Why Did Your Former Clients Leave you?
- 12. Why Did Your Last Client Hire You?
- 13. What Investment Benchmarks Do You Use?
- 14. What’s Your Investment Philosophy?
- 15. How Do You Handle Changes in the Market?
- 16. How Do You Handle Emergencies?
- 17. What is Your Experience with Taxes?
- 18. Who is Your Custodian?
- 19. How Does Your Team Work Together to Work with Me?
- 20. How Do You Measure Success with Your Clients?
- Final Thought
Your Need Comes First Before Asking
Before asking questions, you’d better figure out what kind of help you need from a financial advisor, that’ll make your questions more specific.
There are three main types of financial advisors: certified financial planner (CFP), chartered financial analyst (CFA), and certified public accountant (CPA). Each type has its own set of specialties, so you’ll want to make sure you find an advisor who has experience in the areas you need help with.
Once you’ve narrowed down your choices, it’s important to ask the advisor some questions about their approach to finance and their experience in certain areas. Here are 20 questions to get you started:
1. What Are Your Qualifications?
It’s important to know what qualifications the advisor has. They should be licensed and have experience in the areas you need help with. You’ll be confused by their title as well, so be sure to ask what they mean by the certified financial planner (CFP), chartered financial analyst (CFA), and registered investment advisor (RIA). You can also check by yourself on the Financial Industry Regulatory Authority (FINRA) website.
2. Are You a Fiduciary?
A fiduciary is someone who is legally obligated to act in the best interests of their clients. Not all advisors are fiduciaries, so it’s important to ask this question. If the advisor isn’t a fiduciary, they may not be required to put your interests first.
3. What Service Do You Provide?
Advisors offer a variety of services, such as budgeting, investment advice, and estate planning. Make sure the advisor you choose offers the services you need.
4. What Are Your Areas of Expertise?
Not all advisors are experts in every area of finance. Some may specialize in retirement planning, while others may be more knowledgeable about investing. It’s important to find an advisor who has experience in the areas you need help with.
5. How Long Have You Been Helping Clients?
You’ll also want to know how long they’ve been practicing. Financial planning is a long-term commitment, and you’ll want someone who has experience dealing with different financial situations.
6. What Kind of People You Specialize in Working with and How Many Clients Do You Have?
Some advisors specialize in working with a certain type of client, such as retirees or high net worth individuals. Advisors who have a lot of clients may not be able to give you the attention you need.
7. How Do You Charge for Your Services?
Advisors can be paid in a few different ways: commission, asset-based fee, or hourly rate. It’s important to know how the advisor gets paid because it will affect the advice they give you. For example, an advisor who is paid commission may be more likely to recommend investments that generate a commission for them.
8. What is Your Fee Structure?
Most advisors charge a combination fee of fixed fee, hourly fee, assets under management (AUM) fee and commissions. Be sure to ask what the fee structure is, and how it’s calculated. Advisors can charge a variety of fees, which can add up. Be sure to ask what the advisor’s fee schedule is and what services are included. You should also ask about any other hidden costs, like trading or custodial fees.
9. How Often Do You Provide Advice?
Advisors can provide advice in different ways. Some meet with clients in person, while others communicate mainly through email or phone calls. You’ll want to find out how often the advisor plans to meet with you and what the communication process is like.
Advisors should be able to give you an estimate of how often they plan to communicate with you. They may want to touch base every month, quarter, or year. You should also ask how you can contact them if you have questions outside of their normal communication frequency.
10. Where Do You Keep My Money and How Can I See it?
Advisors can have different arrangements for how they hold your money. Some may keep it with a custodian, such as a bank or brokerage firm. Others may use an investment account that is separate from their own account. Advisors should be able to show you a complete list of your holdings and provide periodic updates on your investments.
11. Why Did Your Former Clients Leave you?
Advisors may have different reasons why their former clients left them. Some advisors may have a high turnover rate, which could be a sign that they are not meeting the needs of their clients. You should ask the advisor for specific examples of why their former clients left them.
12. Why Did Your Last Client Hire You?
This question can give you a sense of how the advisor markets themselves and what they believe their strengths are. The answer to this question can also give you an idea of what the advisor is looking for in a client.
13. What Investment Benchmarks Do You Use?
Advisors use different benchmarks to measure the success of investments. Some use global benchmarks, while others use indexes specific to certain industries or countries. It’s important to know what benchmarks the advisor uses so you can understand how they’re measuring the success of your investments.
14. What’s Your Investment Philosophy?
Advisors have different investment philosophies, which can affect the advice they give you. Some advisors believe in buying and holding investments, while others believe in being more active in the market. It’s important to know the advisor’s investment philosophy so that you can be sure they align with your own beliefs.
Every advisor has their own investment philosophy, which is a set of beliefs about how investing should work. You want to make sure the advisor’s philosophy aligns with your own. For example, if you’re looking for conservative investments, you wouldn’t want an advisor who is always looking for high-risk opportunities.
15. How Do You Handle Changes in the Market?
The financial markets are always changing, so it’s important to find an advisor who is prepared for these changes. Ask the advisor how they handle market fluctuations and how they will help you adjust your investments if necessary.
16. How Do You Handle Emergencies?
You may want to withdraw the money due to an emergency, such as a job loss or health emergency. Advisors should have a plan for how they will handle these types of requests.
Advisors have different policies for how they handle emergencies. Some may have a 24-hour answering service while others may only be available during business hours. It’s important to know what the advisor’s policy is so that you can get in touch with them if an emergency arises.
17. What is Your Experience with Taxes?
Advisors who specialize in taxes can help you save money on your tax bill. You should ask the advisor about their experience with taxes and whether they can offer any advice on reducing your tax burden.
18. Who is Your Custodian?
Your financial advisor shouldn’t be the only one with access to your investments. You need to ask who their custodian is. This is the company responsible for holding and managing your investments.
19. How Does Your Team Work Together to Work with Me?
Advisors often work with a team of experts to help their clients. Ask the advisor how their team works together and who will be responsible for helping you meet your financial goals.
20. How Do You Measure Success with Your Clients?
Advisors use different benchmarks to measure the success of their clients. Ask the advisor how they measure success and what factors they consider when determining whether a client is successful.
These are just a few of the questions you should ask a financial advisor. By answering these questions, you’ll get a better idea of whether the advisor is a good fit for you. Be sure to also ask about their fees and how they plan to help you meet your financial goals.