Questions to ask a financial advisor

10 Questions to Ask a Financial Advisor

Hiring a new financial planner can be a stressful process, especially if you’re a novice investor. You might not even know the questions to ask a financial advisor during interviews. Sure, there are the obvious two: 1.) How long have you been in the business, and 2.) What are your qualifications? But knowing a financial planner’s experience and certifications still doesn’t give you enough information to make a wise hiring decision.

I’m connected to a large number of wise financial professionals on LinkedIn, so I went straight to the source! I asked them what questions they wished clients would ask them during the interview process and why. What they gave me (us) is pure gold!

10 Questions to Ask a Financial Advisor

1 – “What are you personally invested in and how does that compare to what you are suggesting for me?”

“People need to make sure their advisor practices what they preach,” says Ryan Stark, LPL Financial Planner. “You don’t want an advisor who won’t answer this question.”

This brings up an excellent point. If your financial planner wouldn’t invest in the products they’re suggesting for you, you want to know why. Is it because they have a different risk tolerance or investment strategy? Or are they trying to sell you something that pays them a big commission? This leads us to our next question…

2 – “How do you get paid and what am I getting for the fee?”

Adam Day, CFP, RICP of Wealthquest puts it another way, “How do you bring value to your clients?” It’s important to understand how your potential advisor receives compensation. They might be paid a flat fee, a percentage of assets, or commissions.

Personally, I prefer the percentage of assets method because if my portfolio is worth more, my advisor gets paid more. He or she is incentivized to help me succeed.

You also want to get a clear idea of what level of service you’ll be receiving for the fee. How often will you hear from them? How often will you be sitting down together to review and adjust your financial plan?

3 – “Can you tell me about a time when a client wanted to make a decision that wasn’t in their best financial interest? How did you handle it?”

Ryan Gorman, CFA, CMT, BFA, provided this gem of a question. I like this one because it reveals how comfortable a financial planner is with engaging in difficult, but necessary, conversations.

For advisors like Gorman who specialize in behavioral finance, it also reveals how skilled they are at helping clients manage the emotional side of money. This is definitely a huge plus in a financial planner!

4 – “What is your process for managing investments and how will you protect my portfolio during a downturn?”

Darren Wurz, MSFP, CFP brings up an excellent point. How hands-on will your advisor be relative to managing your investments as the market moves up and down? Are they actively protecting the downside?

I fired my previous financial advisor because I discovered I was paying high fees, yet my portfolio was in a cookie-cutter plan, not being actively managed. If I’d asked this question before I hired her, I might have avoided the whole ordeal!

5 – “Do you have clients just like me, in similar life situations?”

“It’s important to know if the planner has other clients just like you with similar specific challenges or opportunities,” says Dave Lowell, CFP. “You don’t want to be their first client with those types of needs or else you can become the guinea pig.” Enough said!

6 – “If you weren’t a financial planner, what occupation would you pursue?”

Nic Neilson, CFP, says “I personally find this incredibly insightful. I’ve discovered that your financial planner should have something in common with YOU.” Derek Notman, CFP adds this variation: “What do you like to do outside of work?”

Both of these questions draw out the advisor’s other interests and life values. It helps you to learn more about them as a person, not just an advisor. Once you hire a financial planner, the goal is to work with them for many years to come. It helps if you actually like them and respect them as a person.

7 – “What is your process when you don’t know an answer?”

Liz Kitchell, co-founder of Shemoolah, points out that no advisor is going to have ALL the answers. And that’s okay! But are they willing to admit it, and do the research on your behalf to find the answer? And if a potential financial planner acts like they do have all the answers, it could indicate an attitude of arrogance or pride. Next!

8 – “What financial adversity have you experienced and how did you overcome it?”

This one definitely needs to be on your list of questions to ask a financial advisor! “It’s perfectly fine to make mistakes,” says Matthew J Hulse, RICP, “and having an advisor who has made them and learned from them only makes them better at what they do.” It’s easy to be intimidated by financial professionals, but knowing they’re human, just like the rest of us, makes them more relatable.

9 – “What’s your net worth?”

“Honestly, if you’re advising folks on money, I would assume they would be interested in whether you had any yourself!” says David Craig of Craig Capital Corporation. This might be an uncomfortable question to ask, but you want a financial planner who’s financially successful, right? You wouldn’t hire a health and fitness coach who’s out of shape and 100 pounds overweight, right? Unfortunately, you can’t tell by looking at a person if they are financially successful or not, so you have to ask the question.

10– “Do you follow a fiduciary standard?”

Quite a few financial planners brought up this question. According to The Motel Fool, a fiduciary “must always act in the best interests of his or her clients and place clients’ best interests before his or her own. It also means that an advisor must make sure to provide financial advice that is sound, accurate, and free from conflicts of interest.” This is in contrast to the “suitability standard,” which means your advisor only need to provide investment options which are suitable for you and your situation. I don’t know about you, but I want my advisor to always be acting in MY best interest!

Are you hiring a financial planner or thinking about it?

Download my handy checklist of the 10 Questions to Ask Your Next Financial Advisor to take to your interviews!

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Comments 2

  1. I like most of those but I found 6, 8 and 9 to be intrusive and inappropriate for a business relationship. Your advisor is not your friend or close relative, his personal life is off limits. Plus, you have no way to verify his answers.

    1. I would politely disagree. Ideally, you are going to be working with your financial advisor for many years. You are required to divulge many personal details of your life and finances to this person. It’s not a one-way relationship. You’re trusting them with a huge portion of your personal wealth and you want to know if they are a person of quality character that you can trust.

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