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15 Questions to Ask Financial Advisors

6 MIN READ

Before you hire a financial advisor, it’s important to interview him/her. You are about to hire someone who will handle your money - your most important asset. Not only do you need someone you can trust, but someone who has similar beliefs and who listens to your wants and needs too.

Know the questions to ask a financial advisor before working with him/her to prevent financial stress and the hassle of finding a new advisor.

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1. Are you a fiduciary?

This should be your first question to every financial advisor. If they aren’t a fiduciary, it means they can suggest investments and financial products that fill their pockets, rather than suit your best interests. A fiduciary must operate in your best financial interest, so only work with fiduciaries.

2. What are your credentials?

Get ready because they’ll spew a bunch of letters at you. Use this handy guide to find out what they mean. Most people need a Certified Financial Planner (CFP), but you may need something more specialized.

3. How do you get paid?

Each financial advisor has different fee structures. Know what you’re comfortable with before choosing the questions to ask a financial advisor. The most common fee structures are flat fee (you pay one fee), percentage of assets under management, and hourly fee. 

If you don’t understand the fee structure, ask for an explanation in writing so you can refer back to it if you have questions.

4. What’s included in your services?

Ask specifically about the services offered. Don’t assume if you hire an advisor for college planning that he’ll also help with retirement planning. If you have more than one service you want the advisor to do, make sure it’s included in the fees he quoted. 

5. How much experience do you have?

You probably want an advisor with at least a few years under his/her belt. Everyone has to start somewhere, but when you’re talking about your money, you want someone who has been through the ups and downs and are here to talk about it.

6. Who do you work with mostly?

Financial advisors can specialize in certain demographics or professions. For example, some advisors work mostly with teachers or doctors. Others work with retirees. Think about your ‘designation’ and find an advisor who works with people like you.

7. How will we communicate?

You probably have your preferred method of communication as does the advisor. Make sure your ideas match. For example, if you prefer phone conversations but the advisor only communicates via email, it may not be the best match. Don’t forget to ask how often you’ll hear from him/her and on what occasion. For example, are there certain instances when he/she would contact you right away, such as a major dip in the market?

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8. What’s your investment philosophy?

This is important. You don’t want to work with someone whose investment philosophy is nothing like yours. Even though you’re reaching out for help, chances are you have some idea of how you’d like your money invested. You want to work with someone who will work how you do and not against it.

9. How much money must I invest to work with you?

Some advisors have minimum investment requirements, and they’re hefty. Make sure you’re working with an advisor that you can afford and who works with people with similar amounts of money. For example, if the advisor works only with millionaires and you’re investing $100,000, it’s not a good fit.

10. How do you determine asset allocation?

When you think about questions to ask a financial advisor, ask how he/she determines your asset allocation. The right answer is that it depends on the person/situation. If the advisor says he/she uses the same allocation across all clients, it’s not personalized service. What works for one investor may not work for another. You don’t want a one-size-fits-all-approach.

11. Who is your custodian?

Don’t work with an advisor who is his/her own custodian. You want one with an independent custodian (the firm that holds your funds). This eliminates any conflict of interest and deescalates the risk of fraud.

12. Do you have to sell everything to work with the advisor?

Some advisors require you to start with cash with them, not investments. In other words, they make you liquidate everything to start fresh. While that sounds like a nice idea, if you cash everything in, you’ll incur major tax liabilities that aren’t necessary.

13. How often do you update financial plans?

Life changes and so should your financial plan. If your advisor is a set-it-and-forget it type person, you don’t want to use him/her. At the very least, you want someone who will revisit your plan annually. 

14. Do you implement tax-loss harvesting?

Ask advisors if they use tax-loss harvesting to minimize your tax liabilities. If they don’t use it, you could get hit with hefty tax bills for your capital gains. You want an advisor that watches your tax liability along with your investment’s success so you know you’re maximizing every dollar.

15. How do you measure client success?

Everyone has a different idea of what success looks like. Ask the advisor how he/she measures it and what goals/benchmarks he/she uses. Does the advisor focus on client goals, set his own benchmarks or something else? Make sure your values align.

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Tips to Help With Questions to Ask Financial Advisor

Before you talk to a financial advisor, write your questions down. This way you have everything written down that’s important to you. It’s easy to get lost in the discussion and/or get overwhelmed and forget the important questions you wanted to ask.

Remember the reason you have questions to ask a financial advisor. You are looking for someone to manage your money. It’s a big decision and one you shouldn’t take lightly.

Don’t be afraid to tell the advisor you are interviewing other advisors too. It’s only fair to let them know, and they’ll know that they are up against competition. You may find advisors who will lower their fees or at least meet the fees of another advisor if you share that information. 

Now What?

Once you interview financial advisors, see how you feel. Did you trust one more than the others? Did you like the way one advisor worked versus another? Which advisor made you feel heard and that he/she would work with you rather than tell you what to do?

Finding the right financial advisor is a big job! Knowing the questions to ask a financial advisor is an important first step. Once you ask the questions, you can begin making a decision, choosing the advisor that works best for you and your financial needs. 


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