10 Questions to Ask a Financial Advisor (Do You Need a Financial Advisor?)

Do I Really Need a Financial Advisor?

Weighing out the benefits of having a financial advisor is difficult to do without the help of someone knowledgeable about this complex industry.

This article aims to show you what to look for in a financial advisor.

If you already decided that you need a financial advisor, then you can go directly to the “The 10 Most Important Questions to Ask a Financial Advisor” section below for the list of important questions to ask a financial advisor before handing over your personal financial information.

You can then fact check each advisor and weigh their answers against one another to be sure that you find a financial advisor who will suit you best.

To Trust or Not to Trust a Financial Advisor

When choosing a financial advisor, to trust or not to trust is the question of the hour. The first step in finding a financial advisor you can trust is looking for recommendations from reliable sources.

This could mean asking friends and family members for the names of their financial advisors or striking up conversations to see if colleagues or acquaintances dish out their trustworthy advisors.

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It is important to still check the background and business of each financial advisors on your list, because going on a recommendation alone is not enough. To find an advisor’s information, you can run each name through BrokerCheck to view their employment history, certifications, licenses – you can even see the complaints against and violations by any registered financial advisor.

Just because your friend’s brother-in-law is a great financial advisor for them, does not necessarily mean that all the benefits of having a financial advisor will translate for you. Like BrokerCheck’s site says, “there’s no reason not to check,” so before you meet any advisors, make sure that each one is worthy of an interview with you.

Now that you’ve answered the “Do I need a financial planner?” question, we have some questions for you to ask potential firms. Asking our strategic questions will gain you insight into the investment firm’s reputation, knowledge, strategy, and personality. Questions to ask a financial planner include both personal and the business that he or she conducts. It is is neither rude nor inappropriate to ask. Should a financial advisor become short or irritated, quickly end the interview and scratch that name from your list.

The truth is, reputable financial advisors expect questions – it is essentially a job interview and a composed question-and-answer segment implies that you both are serious.

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What to Look for in a Financial Advisor

Look for a good attitude. Investors have become more concerned with the type of relationship they have with their advisors. Since 54% of investors over 40 years old do not consider our economy fully recovered from the Great Recession of 2008, it seems that we are still a little rattled. Now, more than ever, it is important to feel that you can confide in your financial planner.

No matter what type of financial advisor you need, do not settle for someone who does not fit your idea of credible. Key qualities to look for in a financial planner include:

Expert in their field
Easily understands your financial situation
Transparent and insightful before and during every investment
Values and goals with which you easily align
Good interpersonal communication skills

Are you curious why “gets big returns” did not make the top five qualities? We all know that ROI is important; however, it is not enough to create a sense of safety and loyalty these days. Find an advisor you can trust. The relationship between you and your financial advisor must be strong in order for you to feel secure.

You want to find a financial advisor who caters to a high level of care. The same goes when finding a good lawyer, doctor – or, heck, even a good bartender. Maybe “Tony” the barkeep is good at his job if – when you hand him $5 – he sets down a cold, frothy beer in front of you.

However, you may consider only going to Tony if he gives a big smile every time you walk in the door, greets you by your first name, laughs at your bad jokes, and so on. The ROI is the beer, but do not underestimate the value of the relationship. In the end, this mode of thinking will help you successfully select a financial advisor.

The 10 Most Important Questions to Ask a Financial Advisor

Now the time has come to find a financial advisor. Knowing what questions to ask a financial advisor is a quick route to understanding their personality, visions, experience, and innermost thoughts about your money.

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It is not easy to find a competent, trustworthy, and low-cost financial advisor, but the following questionnaire will help you to gauge your candidates and select a financial planner that suits you best. Ultimately, you want to know what type of investor-advisor relationship you are entering and whether it compliments your financial goals.

Begin your conversation with a brief description of your situation. Have in mind the kind of assistance that you are looking for in a financial advisor. Are you looking for part-time help or someone who can manage your entire estate, draft documents, and handle your insurance and taxes?

These are the questions you should be asking any would-be advisors:

1. Are You a Fiduciary?

This is a simple question with a simple answer. As the investor, you are in a position of vulnerability and going on good faith. The answer you want to hear when asking questions to a financial advisor is, “Yes, I am a fiduciary.” This is because a fiduciary acts in the name of good conscience for the sole benefit and interest of his investor. A fiduciary makes a solemn pact to only benefit if and when the investor benefits.

2. When Was Your Last Investment?

Just because an investor meets with you does not mean that he or she is actively investing. If your prospective advisor has not invested in the last 2-3 months, it signals that he or she is out of the loop. One crucial quality to look for in a financial advisor is that he or she has current and comprehensive knowledge regarding the financial industry.

3. What Amount Do You Typically Invest?

The amount of money a financial advisor invests is called a “bite size.” Some investors operate up to $100k, while others do not work with less than $250k. This question to financial advisors helps both you and the advisor decide whether the two of you are a good fit but does not necessarily make one advisor better at his job than another. It simply means one is a better match for your financial situation.

4. How Do You Make Your Investment Decisions?

Each investor has a different philosophy and method for investing, and the financial planner you are interviewing should easily answer this question. If they hesitate or avoid answering this question, it can mean one or both of the following:

The financial advisor is not experienced
The financial advisor will not have open communication with you

Either way, get out. When you need to know how to select a financial advisor, consider how they explain their strategy for each investment opportunity – in a way that makes sense to you – before investing.

An advisor who hesitates to answer this question is not going to provide a feeling of security or any of the other benefits of having financial planner.

5. Do You Have Partners or Other People with Whom You Work?

This question gives you insight into the level of personalized attention you will receive after selecting a financial advisor. The advisor is your point of contact and knows your financial goals best. You can also ask how often each advisor communicates with his or her clients. Look for a financial advisor who shows signs of active involvement in each transaction pertaining to his or her client’s financial future.

6. What investment firms do you use? Why?

Providers such as Vanguard, Citibank, Fidelity, Schwab, and T. Rowe Price tend to have appropriate investment recommendations and rates. You will want to err on the side of extreme caution if an advisor states that insurance companies are used as a method for investment. Be sure to ask them why they choose the firms stated over others, as these firms also need to be beneficial to your financial goals.

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7. What Are Your Stock or Bond Fund Fees?

The benefits of having a financial advisor can become null and void if the cost is too high. Look for a fee-only advisor, rather than an advisor who receives kickbacks or commission. Fee-only advisor costs end up being the lowest because they recommend you to low-cost providers (like the ones mentioned above) and minimize the amount you will spend on trading and brokerage costs.

8. Based on what you know about me so far, what rough estimate of stocks and bonds would you allocate?

Now we’re getting into the nitty-gritty of what to look for in a financial advisor. Essentially, more equity means more risk. Younger investors usually can employ higher percentages but are less likely to do so. Over 75% of millennials are more conservative than they were one year ago. The goal with this question, and ultimately with choosing a financial advisor, is to immediately feel comfortable with the advisor’s responses.

9. Can you provide client references?

If not, then end the interview. However, if the advisor does provide client names, do not be shy about calling. These conversations may lend you awareness into what to look for in a financial advisor and the benefits of having a financial planner. You are legally permitted to ask a financial advisor’s other clients the following questions:

How did you find this financial advisor?
What services does the advisor provide for you?
Does the advisor have weaknesses or strengths to be aware of?
Do you recommend this advisor?

These calls can be extremely insightful. You may discover information that the financial advisor was hiding in an attempt to secure your business.

10. Why are you a good advisor for me?

This question to ask a financial advisor is the final one, and the answer they give should send you into a standing ovation. Each advisor’s answer to this question should be weighed next to one another. Their answers should help you determine what type of financial advisor they are and whether they are right for you.

Should you have follow-up questions, your first visit is usually free of charge, so call the winners back and set up a meeting. If it is not free, it could be a sign of desperation or shady business. The bottom line is that you should find an advisor who (1) answers your questions in the best way possible, (2) blatantly shows you the benefits of having a financial advisor, and (3) has an impressive record. (Be sure to print this article for your interviews!)

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