Finding the right financial advisor can feel overwhelming.
With so many options out there, how do you know who to trust with managing your hard-earned money and guiding your financial future?
The key is to ask the right questions.
By getting answers to a few critical queries upfront, you can gain clarity on whether an advisor is the best fit for your unique needs, goals, and preferences.
Let’s explore the ten most important questions to pose when evaluating potential financial advisors.
Questions to Ask a Financial Advisor
Before committing to working with a financial advisor, be sure to get clear answers to the following vital questions:
1. What are your qualifications and experience?
When it comes to something as important as your financial well-being, you want to work with a true expert. Ask the advisor about their:
- Educational background and degrees
- Professional certifications (CFP, CFA, CPA, etc.)
- Years of experience in financial planning
- Areas of specialization
For example, you might say:
“I noticed you’re a Certified Financial Planner. Can you tell me more about the training and experience required for that designation? And how long have you been working as an advisor?”
The more qualified and knowledgeable the advisor, the more value they can provide. Look for someone with credentials from reputable organizations and ample experience, especially in areas relevant to your situation.
An advisor’s response can reveal a lot. If they confidently discuss their extensive training and track record of guiding clients in situations like yours, that’s a good sign. On the other hand, if they seem unsure or inexperienced, you may want to keep looking.
Ultimately, you should feel confident the advisor has the expertise to provide high-quality, trustworthy guidance for your specific financial needs and goals.
2. How do you get paid?
Many people feel awkward talking about money, but it’s crucial to understand an advisor’s fees and compensation structure upfront to avoid surprises. Common fee arrangements include:
- Commission-based: Advisor earns commissions on products they sell you
- Fee-only: You pay the advisor directly, either hourly, as a flat retainer, or as a percentage of assets they manage (most common)
- Fee-based: A combination of fees and commissions
You could ask:
“What can you tell me about your fee structure? Are you fee-only, or do you also receive commissions? I want to make sure I fully understand how the costs will work.”
Generally, fee-only advisors are preferable because their incentives are better aligned with your interests. They succeed when your portfolio and net worth grow.
If the advisor seems cagey about their fees or emphasizes their services are “free,” probe deeper. Almost all advisors charge in some form. If they’re earning commissions, ask whether they’re required to recommend certain products.
By understanding an advisor’s compensation model, you can determine if it aligns with your expectations and best interests. Beware of advisors who dodge the question or make their fees seem unnecessarily complex.
3. What services do you provide?
Not all financial advisors offer the same menu of services. Some focus narrowly on investment management, while others provide holistic planning spanning investments, retirement, taxes, insurance, estate issues, and more. Be sure the advisor can meet your specific needs.
Consider saying:
“As I think about my financial priorities, I’m looking for help with [investment management, retirement planning, etc.]. Which of those services do you provide? And what’s your process for understanding a client’s full situation and creating a comprehensive plan?”
The advisor should be able to clearly articulate their service offerings and planning approach. They should have a structured process for evaluating your needs, explaining their recommendations, implementing strategies, and conducting ongoing reviews.
If the advisor seems vague or unable to provide a concrete explanation of how they would serve you, that’s a red flag. You need to feel confident they can deliver the solutions you require.
On the other hand, if the advisor demonstrably understands your needs and can detail how their team and process can help you reach your objectives, they may be a good fit. The right advisor will instill a sense of trust and relief that your financial life is in capable hands.
4. Who is your typical client?
Some advisors are generalists, while others focus on serving certain “niches” or types of clients with particular needs. For example, some specialize in advising business owners, busy professionals, retirees, or those with complex estate issues. You want an advisor experienced in serving people like you.
You might say:
“Can you describe your typical client? What life stages and financial situations do you have the most experience advising on?”
Note whether the advisor’s clientele seems to match your own demographic and financial profile. While you don’t need to be their only type of client, you should feel confident they understand the needs and challenges of people in your situation.
If the advisor frequently works with people facing similar issues to yours, they’re more likely to have deep knowledge of the strategies and solutions most helpful for you. Conversely, if you would be an outlier among their client base, they may not be the best equipped to advise you.
The advisor should demonstrate an understanding of the hopes, fears, challenges, and opportunities shared by their target client segments. Ideally, you want an advisor who specializes in serving people like you and can offer tailored insights and guidance.
5. What is your investment approach?
Advisors can vary widely in their investment philosophies and the strategies they use. Most fall somewhere on the spectrum from active management (attempting to “beat the market” through frequent trading) to passive management (mirroring the market through index funds).
Ask the advisor questions like:
“What principles guide your investing approach? Do you believe in active management, passive strategies, or some combination? How do you make portfolio decisions?”
The advisor should clearly articulate their investment philosophy, explaining how they choose and monitor investments, optimize for taxes, and control costs. They should tailor portfolios to each client’s goals, risk tolerance, and time horizon.
If the advisor seems to lack a cohesive strategy, jumps between approaches, or can’t explain their reasoning, be cautious. Alternatively, if they take an educational stance, helping you understand the merits of their approach and how it aligns with your needs, that’s promising.
As with fees, you want an advisor whose investment approach makes sense to you and feels like a fit for your situation. Don’t be afraid to probe into the details to ensure you’re comfortable with how they would manage your hard-earned assets.
6. Who will I be interacting with?
At many advisory firms, clients interact with a team of professionals rather than a single advisor. A senior advisor might create your initial plan, but paraplanners or junior advisors handle ongoing support and reviews. This can be fine, as long as you understand the arrangement upfront.
Try asking:
“Will I be working with you directly as my advisor? If you work with a team, what will each person’s role be and who will be my primary point of contact?”
You want to feel confident that someone knowledgeable will be readily accessible to answer your ongoing questions and provide advice. If the advisor will delegate most client communication to junior staff, make sure you’re comfortable with their experience level.
There’s no single right answer, but you should know what to expect in terms of access and support. If you anticipate wanting a lot of “face time” with your advisor, a team approach with limited interaction with the lead advisor may not be for you.
Trustworthy advisors will be transparent about their client communication process and team structure. They should help you understand how they can meet your expectations and who you will be relying on for ongoing support.
7. What makes your client experience unique?
Many advisors offer the same basic services, so you might consider what extra perks or resources a firm provides to enhance your client experience and financial life. Do they offer educational events? Tax preparation? Budgeting tools? Robust online platforms?
Consider saying:
“Beyond the typical planning and portfolio management, what other resources and benefits do you offer to enrich the client experience?”
While “extras” shouldn’t be the main factor in your decision, they can be a meaningful differentiator and help you get the maximum value from the advisory relationship.
Some advisors provide unique events, communication, or technology to keep clients informed and engaged. For example, they might host quarterly market updates or educational webinars. Others offer more personalized perks like helping clients’ kids establish good financial habits.
If an advisor seems stumped by this question or doesn’t offer anything beyond the basics, it doesn’t necessarily mean they’re a bad choice. However, an advisor who can demonstrate valuable “above and beyond” services may deliver a superior client experience that supports your financial life more holistically.
8. How often will we meet to review my plan?
To keep your plan on track and accommodate evolving life circumstances, you’ll need to meet with your advisor periodically to review your strategy and progress. Most advisors meet with clients 1-4 times per year, either in person, by phone, or virtually. Ensure the advisor’s process aligns with your expectations.
You could say:
“What does your ongoing review process look like? How often will we meet to revisit my plan and portfolio? And what will we discuss in those meetings?”
The advisor should have a systematic approach for keeping plans current and addressing changing needs. Consider whether their meeting cadence and process seem sufficient for you to feel informed and supported.
If you anticipate wanting more frequent contact and plan updates, an advisor who typically meets with clients only once a year may not be the right fit. On the other hand, if you prefer to be more hands-off, quarterly meetings might feel like overkill.
There’s no universal right answer, but you should feel comfortable that the advisor’s communication style and review process will keep you in the loop and on track. The best advisors will work with you to find a meeting frequency and format that achieves your desired level of engagement and sense of progress.
9. What happens to my money if something happens to you?
While it may feel awkward to ask, you need to know what would happen to your assets and financial plan if your advisor became incapacitated or passed away. There should be a clear continuity plan in place to avoid any disruption to your financial life.
Try asking:
“I want to be prepared for the unexpected. Can you tell me what systems or contingency plans you have in place to take care of clients if anything ever happened to you?”
Ideally, the advisor has other capable professionals on their team who could seamlessly step in if needed. They may also have an arrangement with another advisory firm to support their clients in an emergency.
If the advisor seems caught off guard or doesn’t have a coherent continuity plan, consider that a warning sign. You don’t want to be left in the lurch or have your money inaccessible if your advisor faces a crisis.
On the flip side, an advisor with a thoughtful strategy for emergency coverage will provide peace of mind that your financial life won’t miss a beat, even in the face of unexpected events. The best advisors have your back no matter what the future brings.
10. Why did you become a financial advisor?
It’s a good idea to understand an advisor’s story and what drives them both professionally and personally. Do they see their work as just a job, or are they on a mission to help people achieve financial security and live their best lives? Getting to know them as a person can help you build a more comfortable and productive working relationship.
You might ask:
“What inspired you to become a financial advisor? What do you find most fulfilling about your work?”
While some advisors may give a canned response, most will light up at the chance to share their story. They might discuss how they discovered a passion for helping people navigate important money decisions. Or they might share how witnessing a family member’s financial hardship motivated them to help others avoid the same struggles.
If you sense that empowering people to achieve their dreams energizes an advisor, they’re likely in the profession for the right reasons. You want to work with an advisor who finds deep personal reward in serving clients and bettering their financial lives.
On the other hand, if an advisor seems more focused on their advancement or the firm’s success, they may be less invested in your outcomes. Opt for an advisor who demonstrates a genuine passion for making a positive difference for their clients.
Concluding Thoughts on Choosing a Financial Advisor
Selecting a financial advisor is one of the most important decisions you will make, so be sure to conduct thorough due diligence.
Ask hard-hitting questions to evaluate an advisor’s background, business model, planning approach, service offerings, and passion for their work.
By boldly tackling key issues like qualifications, compensation, investment process, client experience, emergency planning, and personal motivation upfront, you’ll be well-equipped to identify an advisor who instills trust and makes you feel supremely confident in your financial plan.
The right advisor can be a lifelong partner in building your wealth and achieving your dreams.
So take the time to ask the right questions and find someone with the expertise and personal commitment to be a true advocate for your financial success.