Whether you’re just starting your career, nearing retirement or somewhere in between, a financial advisor can help you navigate important decisions about your money. Financial advisors come with an array of backgrounds, so it’s important to know how to choose the right advisor for you.
When evaluating a financial advisor, you should research their education and experience. You also need to schedule an appointment to talk about their services and how they can assist you. Knowing what questions to ask a financial advisor during the interview helps you get the answers you need so you can make the best decision.
What To Ask Yourself Before Seeking a Financial Advisor
Before you start interviewing financial advisors, take some time to define your goals. Ask yourself, “What do you want?” The answer to this question will help you figure out what kind of professional assistance you need and what to ask a financial advisor during the interview. Other matters to consider are higher education, retirement and insurance.
What To Ask a Financial Advisor Before Hiring Them
The best way to evaluate a financial advisor before you hire them is to ask questions about their experience and values. Their answers to the following questions provide insight into the way they work so you can select the person who meets your needs.
- How do you get paid?
There are many ways financial advisors get paid for their services, including:
- commissions from selling certain funds
- insurance commissions
- charging a percentage of assets under management
- flat fees
- hourly fees
Understanding how a financial advisor gets paid will help clear up whether they are working in your best interests or not. That’s because advisors who earn money by selling you certain investments or products will likely give you biased advice. Fee-only advisors, don’t have any conflict of interest when it comes to managing your portfolio.
Many financial advisors are so new and still drinking the Kool-Aid of whatever firm they are at. So they don’t have a clear understanding of how clients are being charged fees.
- How many clients do you work with?
Finding out the size of an advisor’s client base can tell you a lot about what kind of service you can expect to receive. For instance, if advisors have a lot of clients they’re most likely financial salespeople and not financial planners. They need to continually get more clients to make a living, which poses a conflict when trying to do what is in the best interest of the client.
On the other hand, if advisors don’t have many clients they may be just getting started and may not have much experience.
The big reason this is important is if you are having someone put together a plan for you today, you really want them for the long haul to make the necessary adjustments. You don’t want to be seen as just a commission check for someone in sales or a guinea pig for someone brand new.
- How is your money invested?
You probably wouldn’t want to visit a nutritionist who eats nothing but pizza and fries. So when it comes to financial advisors, you want to know that they practice what they preach. That’s why you should ask advisors how their money is invested.
If they are not willing to tell you or show you how their own money is invested, then maybe they don’t completely believe what it is that they are telling you. That would be a good indicator of whether to continue the discussion or not.
- What does your ideal client look like?
Financial advisors have varying areas of expertise and investment styles. One advisor could be a great fit for one client while a poor match for another. That’s why you should ask advisors you’re considering working with what their ideal client looks like.
If they provide a general answer like: I work with anyone and everyone who needs financial help. And you are just looking for general advice, they are probably a good fit for you. However, if you’re looking for specific advice like help with complex stock options or splitting up your assets due to a divorce, you may want to keep looking and find an expert in those areas.
- Are you a fiduciary 100 per cent of the time?
A fiduciary is a person who is legally and ethically required to act solely with your best interests in mind. Just about anyone can call themselves a financial advisor. But only certain professional designations are held to a fiduciary standard, such as certified financial planners. Others, such as stockbrokers and insurance agents, are not.
- How do you communicate with clients?
Everyone has different communication styles, including when working with a financial advisor. You might enjoy frequent phone calls and emails or prefer a more hands-off approach.
It’s fair to expect regular communication from your financial advisor, but ‘regular communication’ is subjective. Would you like a quarterly phone call? Do you prefer to meet in person, or do virtual meetings fit better into your schedule? Does your advisor meet with clients quarterly, semiannually or annually? Find out how your advisor prefers to communicate with clients and ensure it meets your expectations.
- What is your investment philosophy?
Different financial advisors have different investment philosophies. Essentially, an investment philosophy is a set of guiding principles that helps advisors make proper financial decisions. It explains what goes into the process of choosing appropriate investments for a given situation of their clients.
It’s important to ensure your advisor’s philosophy aligns with your values and goals. At the very least, he or she should have one and be able to explain it to you.
