Questions to Ask a Financial Advisor

Before you hire a financial advisor, know what to ask him or her. Just like when you choose a real estate agent or insurance agent, you should shop around, interviewing at least 3 advisors. Remember, they are dealing with your money. It’s just as much of an investment choosing the advisor as it is investing your money.

So what should you ask an advisor? Here are some top questions to consider.

Are you a fiduciary?

This is important as it pertains to how the advisor gets paid. If he/she isn’t a fiduciary, it means the advisor may steer you toward specific investments that pay him/her the highest commissions. A fiduciary, on the other hand, must operate in your best interests – it’s the law.

What experience do you have, and with what type of clients?

Depending on your financial status, you want a financial advisor that works with your level of finances. For example, if you’re an ‘average’ American, you don’t want to work with an advisor that only works with wealthy individuals.

How do you get paid?

Advisors work on a variety of fee schedules. Try to stick to fee-only advisors. These advisors get paid either a flat fee or a percentage of assets under management. What they don’t get is a commission for selling you particular investments, which means you won’t be pressured into investments you don’t want.

How will we communicate?

You may have one idea of communication with a financial advisor, and he/she may have another. It helps to be on the same page before you start. For example, if you prefer phone conversations, and the advisor primarily communicates via email, you may want to work with someone else. Also, ask how often you’ll talk. If it’s not often enough for you, look elsewhere.

What services do they include?

Financial advisors can do a lot, but not all of them do everything. For example, if you want investment advice, you need an advisor that offers it. Some just focus on long-term wealth, but don’t give individual investment advice, while others do it all. Think about what you want and ask specifically about those services.

How do you figure the asset allocation?

If a financial advisor uses a one-size-fits-all approach, don’t use them. Investing should be individualized. No two investors have the same goals, risk tolerance, and money to invest. Your investment plan should consider all aspects of your goals and risk tolerance to help you stay on track.

Who is your custodian?

This is the financial institution that will hold your funds. It’s rarely the financial advisor himself. Know who it is and do your research. Are they reputable? Is your money protected? See what others have to save before diving in headfirst.

What is your investment philosophy?

If you’ll use the advisor to manage your investments, know his/her philosophy. Does the advisor get in and out of the market often? What are his/her thoughts on long-term strategies? Does the advisor invest primarily in stocks, rarely considering mutual funds, ETFs, and bonds? See how his/her investment philosophy aligns with your own.

Do you offer tax advice?

Most financial advisors won’t advise you on taxes, but they may help you limit your tax liability with your investments. If they don’t talk about tax-loss harvesting or ways to minimize your tax liability, you may want to look elsewhere, at least if you want to keep your earnings in your pocket and not Uncle Sam’s.

How often will you review my portfolio?

How often an advisor looks at your portfolio is essential. He or she may rebalance it, advise you to make changes, or just leave it. The key is that he/she reviews it often, whether that’s monthly, quarterly, or annually is up to you.

It’s your job to vet your financial advisors. We recommend talking with at least three advisors before making a decision. Ask each advisor the same questions and compare the answers. You want the professional that checks most of your ‘wants’ without making you feel uncomfortable. Remember, your financial professional is there to manage your money. If you aren’t comfortable talking to him/her or asking questions, you may want to look elsewhere.