5 Questions To Ask When Looking for the Right Financial Advisor

March 16, 2019

When it comes to financial guidance, the person you choose to assist you in reaching your financial goals is crucial. Whether you need to know if you have enough to retire, if your business is positioned well to sell in the near future, or you are planning your children’s college or marriage, the advice that you receive from your financial advisor will determine the difference between accomplishment or disappointment.

The first step in choosing a financial advisor is to determine if the advisor has your best interest at heart.

• How can you tell if the person you are considering is a professional financial advisor or just someone who wants to sell you products?
• How can you tell if the advisor is going to do what is best for you rather than just sticking to the basics of what’s appropriate?

This list of questions will help you separate the wheat from the chaff.

It will help you evaluate during the vetting process what level of service and expertise you can expect from a qualified advisor. Pay attention to the answers given by the prospective advisor, and you will glean all the insight you need about the type of advice and guidance they’ll give you.

1. Why did you become a financial advisor and how will you help me reach my financial goals? 

This straightforward set of questions will shed light on the advisor’s personal motivation, as well as what drives them in their profession. Is this person excited to work with people just like you?

You will also want the advisor to lay out a clear financial planning process that explains the expectations and shows how the investment strategy will align with your financial goals and values.

2. What educational and professional experience do you have? 

Has this person received specialized training beyond what is required for licensing to sell securities? Was the training attained at an accredited institution? What professional designations does the individual hold and how much continuing education is required with the designation?

The person that you will trust to manage your assets should have a deep understanding of holistic financial planning strategies and investment management ideas that are appropriate for you and your unique financial situation.

3. Where do you invest my money? 

You will want to know where your assets are invested and the reasoning behind the investment strategy. You should also expect the advisor you’re vetting to explain their investment style in a jargon-free manor. They should make themselves easily understandable if they want your business!

Ideally, an advisor will be interested in understanding your financial goals, timeframe, and investment philosophy rather than simply suggesting a product for you to buy. So, you will want this person to explain how their investment strategy will help you work toward your financial goals, focusing on how comfortable you are with investment risk, compounding growth, and minimizing your taxes.

Having a clear investment strategy is paramount.

4. How are you compensated? 

Financial advisors and registered representatives get paid in many different ways. Some are paid from the commissions generated on the products they sell, others charge a fee for their services based on the amount of assets they are managing for you. Some charge hourly rates, while some are paid fees by the companies whose products they sell.

You will want to work with an advisor who will make financial recommendations that are based on what is best for you, and not on what pays the most to them. It is advantageous for you to have one hundred percent clarity around the fees that you will be charged.

5. Are you a fiduciary and required to do what is in my best interest, or do you only need to make recommendations that are suitable for me? 

Hands down, this is the most important question you can ask when looking for an advisor.

Advisors who are fiduciaries are required to give advice and recommendations that place the client’s best interest ahead of their own self-interest. By contrast, advisors who are only required to meet the “suitability” standard can make any recommendations as long as it is “suitable” to the client. What does this mean for you? A non-fiduciary advisor is not required to disclose to you that two similar investments have vastly different fee structures.

The fiduciary standard is the highest standard for financial advice. When looking for an advisor, this standard should be your number-one priority. A fiduciary is fair and works to align their interest with yours.

When selecting an advisor that is the right choice for you, it is definitely worth asking your prospective advisor each of these questions up front. The more information you have, the better able you will be to make informed decisions that will pay dividends in the long run.

Have more questions about finding the right financial advisor for you? We’re more than happy to provide information and empowerment.

It’s what we do!

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