Top Questions to Ask a Financial Advisor

To find the best financial advisor for you, it’s important to ask the right questions. Learn what to ask before hiring a financial advisor.

There are many reasons to consider hiring a financial advisor. Whether you’re unsure what to do with your own investment portfolio or you’re looking for advice on how to save for a comfortable retirement, hiring a financial advisor may help you sleep easier at night.

To find the right financial advisor for you, it’s important to interview multiple financial advisors and ask the right questions, especially if it’s your first meeting. Here are the top questions you should ask before picking a financial advisor.

Will You Put My Interests First?

If a financial advisor is a fiduciary, then they adhere to standards to work in your best interest. For example, financial advisors who have earned the Certified Financial Planner (CFP) designation agree to always act in their client’s best interests. 

The term fiduciary is often used on websites, but what does it mean, and how can you be sure that the advisor is adhering to the standards of a fiduciary? The fiduciary standard expressly states that advisors who uphold it are required by law to put the needs of their clients first.

Ryan Firth, the founder of Mercer Street Financial, says you should ask direct questions about the priorities of an advisor, such as:

• Will you and your firm always act in my best interest? If so, how? 
• Give me an example or two of how you put your client’s interests ahead of your own? 
• In plain English, how do you mitigate potential conflicts of interest between what’s best for your clients and what’s best for you or your firm?

Another role of a fiduciary is to limit or be transparent about any conflicts of interest that may arise. A fiduciary is essential because conflicts of interest may affect the quality of work the advisor can provide and create unnecessary stress.

So how do you make sure you choose a fiduciary who will put your needs first and uphold the standards required of them? You can use the Broker Check feature on the FINRA site to check the advisor’s background you are considering or choose an advisor who has earned their CFP designation.

“In order to be a true fiduciary, the advisor’s compensation should not be directly tied to the recommendation,” said Sean Polley, Private Wealth Manager and CEO of Polley Wealth Management. “For example, if the advisor’s recommendation includes moving your assets to the advisor, then the advisor’s compensation is tied to the recommendation. Therefore, a separate fee for advice, not tied to assets under management or commissions, will determine if the advice is true fiduciary advice.”

How Do You Get Paid?

Advisor fees and compensation can be a frustrating grey area if you are not careful. A lot of financial advisors do not disclose their fees on their websites. There are many ways that financial advisors are paid, and they should be honest about those fees and what you will need to pay. 

“There is no fee model that is universally the best fit for all people in all circumstances, and claims to the contrary are obviously silly or even self-serving,” said Daniel M. Yerger, President at MY Wealth Planners and a doctoral researcher at Kansas State University who specializes in compensation research.

“Some people want a check-up plan to ensure they’re going in the right direction. Some people want to wholesale delegate their finances to a professional. Others want ongoing guidance but want to stay hands-on. The best fee model for any individual is the one that aligns their advisor’s interests with the services that the person feels they need for their financial planning needs,” said Yerger. 

Here are a few different ways a financial advisor can be compensated. 

Fixed Fees

A fixed (or flat) fee is a previously specified price for a particular service. For example, a financial advisor might charge $3,000 for the one-time creation of a financial plan. 

Hourly Rate

An hourly rate is a straightforward fee that outlines the hourly pay for the financial advisor.

Assets Under Management

Advisors who charge this annual fee will take a percentage of your investments. An AUM fee is charged as advisors are compensated for managing their clients’ investments. 

Commissions

Financial advisors may receive commissions for products they recommend to you, such as mutual funds and annuities. Make sure your advisor is transparent with you about which of the products they are advertising are commission-based.

Advisors may also use a different fee structure depending on what services are provided.

What Services Do You Provide?

Before you decide to hire, it’s essential to understand what specific services you need to be performed.

You don’t want to waste your time with someone who is not an expert in the service you are looking for. 

Stephanie McCullough, Founder & CEO of Sofia Financial, encourages people to ask an advisor about their expertise. “The most crucial question to ask an advisor is whether they offer the service you need,” McCullough said. “If you need investment management, cash flow strategies, or retirement savings planning, be sure you’re talking to advisors who specialize in those services.”

Financial advisors usually offer a wide variety of services. These services often include:

• Education savings
• Tax mitigation opportunities
• Cash flow strategies
• Charitable giving
• Retirement planning
• Business succession options
• Insurance protection 
• Trust and estate planning
• Comprehensive wealth management services
• Portfolio management

Choose someone who will be able to meet your current and future needs, as your finances will likely evolve throughout your life. 

What Is Your Investment Philosophy?

A good financial advisor will dig deep into your investment needs (and ask you questions) before recommending any products or services to you. 

You want an advisor who makes an effort to understand the full scope of your needs and who will align themselves with your goals. Their investment advice should mirror this philosophy as well.

Ask your advisor if they prefer one specific investment style or one type of investment. The ideal advisor should not take a one size fits all approach, as some investment styles may work well for some individuals but not so well for others.

What Experience Do You Have?

There are pros and cons to working with financial advisors who are new in the field. They are likely to be more excited about their work and more dedicated. They may also have the resources of a well-established firm to back them, which could work well for you. 

However, they have not been tested yet, and if they don’t have prior advising experience, it may be better to seek out someone more seasoned in the field.

Always look at an advisor’s career history to see if they have other finance-related experience or professional certifications that will benefit you.

Expert Voices: More Questions to Ask 

“My favorite question is, ‘Why do you like to do things differently than other advisors?’” said Blaine Thiederman, CFP and Founder of Progress Wealth Management in Denver.  “We customize your financial plan, so there’s no one-size-fits-all for every client. This might mean your first priority will be to get a raise (if you’re underpaid), increase your saving for retirement, set up a cash balance pension plan for your company, improve how you invest, improve your tax plan to lower your future tax bill, or so on. The point is, you’ll understand with absolute confidence why we’re recommending what we are and why it should be prioritized first.”

Choose An Advisor Who Aligns With Your Needs and Values

There are many different factors to consider when choosing a financial advisor. Make your selection with your needs and values at the forefront of the decision-making process.

Seek an advisor who will be transparent about what they will offer you and someone who will be collaborative and put your needs and interests first. It is crucial to find a financial advisor who will build personalized strategies for you as your finances evolve over your lifetime.

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About the Author

Max Marvelous

As a Certified Credit Counselor, Max has coached over 250 Millennials to help take the stress out of money. After coaching, his clients live stress-free about money and have a simple plan they can follow to accomplish their goals. When Max is not coaching, you’ll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches. Website

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