7 Thought-Provoking Questions to Ask Your Financial Advisor

Oct 28, 2018

A financial advisor can help you with everything from creating a financial plan to managing and building wealth. Finding a good financial advisor match is easier said than done. No two financial advisors are the same. Therefore, you need to do your homework to ensure you are working with someone that suits your needs.

Based on my experience, the following are seven of the best thought-provoking questions you should ask a financial advisor during a first meeting.

What are your qualifications?

Asking this question serves a couple of useful purposes. Most importantly, it cuts through all the marketing jargon. For example, the financial services industry has numerous unregulated and similar sounding professional titles. For the average client, this can be confusing. No matter what title an advisor gives himself, asking what their qualifications are will tell you how they earn a living. For example, if someone holds an insurance license, they will only make money if you purchase insurance through them. By understanding this you will get an idea of what type of product or service recommendations you will receive.

Also, you should find out if they have earned any professional designations such as the popular CERTIFIED FINANCIAL PLANNER™ certification.

In addition, The Financial Industry Regulatory Authority (FINRA) has a professional designations database that provides more information on numerous other designations.

How are you compensated?

It is important to understand how your advisor is compensated. A financial advisor living off commissions will have different goals than one working on a salary. For example, fee-only investment advisors may charge a flat fee, an hourly rate or a percentage of assets managed. On the other end of the spectrum are commission-based brokers, who make money on the products they sell you.

In a previous article I discuss in depth how financial advisors are paid.

What services are included?

This question is important because financial advisor services can vary greatly. For example, there are some advisors that only provide clients with investment advice. Another subset of advisors may only sell insurance. Also, advisors that hold themselves out as comprehensive financial planners may look at your entire financial picture.

Depending on what services you value the most, understanding the value proposition of a financial advisor will allow you to find the right match.

What is your ideal client?

Asking this question helps you make sure that your financial advisor has the ability to provide you personalized service. Also, by identifying an ideal client profile, both you and your advisor can determine if there is a mutual fit before working together.

If you have found the right match, you will hear a description that sounds remarkably like you.

How will our relationship work?

In other words, how often will you have access to your advisor? How often you will meet? Whether or not they are available for phone calls, video chat, or emails outside of scheduled appointments.

Asking this question will help set expectations so your financial advisor can fully collaborate with you. Some clients only want to meet once a year. Others want to speak more frequently. It is best to make this clear in the beginning.

Do you have a succession plan?

It is important to find out what would happen to your money if something happens to the financial advisor you are working with. For example, if the advisor works as part of a bigger team, you should find out if someone at that company will take over your accounts. If the advisor is independent, you will want to know which business will take over your accounts.

Can you explain an important financial concept to me?

This is an important question because it will allow you to evaluate if you can understand their explanation. If they speak over your head, even after clarification, it may not be a good match. You want to work with someone who can explain financial concepts in a language you can understand.

Below are some concept-oriented questions to consider asking:

  • What is your investment philosophy?
  • What is your opinion on the state of the economy?
  • Should I buy a home or rent an apartment?
  • How much money can I safely withdraw during retirement?

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