16 Questions to Ask a Financial Advisor

Do you have several candidates for a financial advisor but remain unsure who is actually looking out for you? 

We’ve put together this list of the top 16 questions to ask a financial advisor you are considering hiring—it’s like an interview to see if they have the experience, qualifications, and spirit that fit your needs and financial goals.

And if you’re not at this step yet—aka you have no potential candidates and have no clue what kind of financial advisor is right for you—then check out our blog post here on finding the right type of personal finance support for your situation.

But if you’re ready to grill your potential personal finance advisor, let’s get cooking!

The top three questions to figure out who’s a good actor:

How do you earn income from your clients? 

Or more directly: “Do you earn fees and/or commission off of the trades you recommend? Do you make money by recommending certain firms or financial products?” 

You want to find an advisor who is "fee-only": they'll only charge you based on the actual advice they give you, typically as a % of your assets under management (aka. how much money you have in the bank or your investment accounts) or hourly vs. per trade (which automatically is a bad incentive that sets them up to try to sell you as much as possible). 

They won’t have extra hidden fees that appear as you progress your conversations with them, or be pushing their own proprietary products. Super confusingly, some advisors call themselves “fee-based” but that means they take fees… AND also still take commissions!

Which professional credentials do you have, and what are their requirements?

Find an adviser who is a Certified Financial Planner (CFP). Only 1 in 5 (shockingly) people who call themselves "advisors" actually have this designation. It’s the gold-standard (think of it like the CPA for accountants) in the field. Using an advisor who is not a CFP is like going to a doctor who never went to med school or working with a lawyer who never took the bar.

Are you a fiduciary?

This has to be a resounding yes. Find someone who specifically states they are a fiduciary. This means they are putting your interests first, vs. the interests of their firm. Yes, CRAZILY, there are many players out there who are financial advisors who are not fiduciaries. That would be like going to a pharmaceutical company for medical advice vs. a doctor.

‍

The other important questions to ask:

Do you participate in any sales contests or award programs that create incentives for certain vendors? 

The answer should be no. Your advisor shouldn’t have any incentive to sway your financial plan in any direction other than what is in YOUR best interest.

Do you pay any referral fees to generate new clients? 

Again, this should be a clear no. They should not be paying others to recommend them as financial advisors. They should get referrals based on their track record and performance as an advisor!

Do you earn fees for referring clients to specialists (e.g. estate attorneys, insurance agents, realtors etc.)?

Another resounding nope. They shouldn’t be making money off of who they refer you to. They should refer you to the best of the best—because that’s what the client deserves, not because they are getting a paycheck for it.

Do you have any conflicts of interest and would you be willing to put them in writing? 

They should be transparent with you. They should be more than willing to let you know of any conflicts of interest they have.

Can you please itemize all your fees and expenses in writing? 

Yes! If they’re not willing to break it down, that means something sketchy is going on behind the scenes.

Do you only advise on investment management, or do you also advise on taxes, estates, retirement, budgeting, debt management, and insurance?

This depends on your needs as a client. But usually, to get a complete picture of your financial situation and how to best serve your goals, the advisor should be able to advise on all of the above!

What is your investment philosophy?

This also depends on your needs as a client. Ensure their philosophy aligns with yours and that you’re on the same or similar pages.

Would you mind showing me a plan you’ve worked on for someone in a similar financial situation?

They shouldn’t hesitate to show you an example plan! If they aren’t willing to, that means they either haven’t worked with clients who have a situation like you before (red flag!) or maybe they don’t even have plans to show you (an even redder flag!!!).

Do you believe you can beat the market?

No smart advisor should ever confidently say they can always beat the market. Nothing is promised, so an advisor should always be cautious and aware of market risks.

How do you report investment portfolio performance? 

Make sure you know how they’re going to report your portfolio performance and the metrics they use to measure success. This will allow you to hold them accountable and to be able to cross check the performance.

After inflation, taxes, and fees, what is a reasonable estimated return on my portfolio over the long term?

If an advisor guarantees anything over 3%-4% annually… be cautious; they’re either being deceptive or are pretty naive.

Who manages my money? 

The answer should be “I do.” The work shouldn’t be handed off to an associate or intern. Your financial advisor should be working directly on your plan and ensuring they’re meeting your financial goals.

Who manages your money?

The answer should also be “I do.” If your advisor thinks they’re the best person to manage your money, they better think they’re the best person to manage their own.

Want to give these questions a test run?

Steward ‘s mission is opening up the 1%’s wealth strategies to America’s up-and-coming families with a combination of 21st century tech and trusted advisors. We help families determine how, where, and when to invest and save on taxes in plain-English, with minimal time and effort. Steward can help determine if we’re the right personal finance fit for you, or we can at least get the conversation started. Give it a try here.

Reach out to me at ami@oursteward.com or schedule a free 15 min consultation to see if we’re a good mutual fit.

‍