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20 Questions to Ask a Potential Financial Advisor

Choosing the right financial advisor is important because of their role in helping to secure your financial future. Ideally, you want to find an advisor with the knowledge, experience and qualifications you need, and who also who charges a reasonable fee can relate to you as a client. Here are 20 questions to ask a potential financial advisor to help find the right one for you.

Questions to Ask About Your Financial Advisor

1. Do you serve as a fiduciary?

A fiduciary is legally required to make recommendations that solely benefit your best interests.

2. What credentials do you have?

There are long list of credentials an advisor might possess. Common credentials include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA) and Chartered Financial Consultant (ChFC). (For related reading, see: The Alphabet Soup of Financial Certifications.)

3. How many years of experience do you have?

Evaluate if the advisor has adequate experience to guide you through various life events, market conditions and financial decision-making.

4. Will I be working with you or another advisor?

Firms often change advisors as relationships grow. Ask how long clients work with the initial advisor or how frequently relationships tend to change.

5. How often will you contact me?

Ask how often the advisor will contact you. Ideally, you want a proactive advisor who also welcomes your questions.

6. How many clients do you work with?

An advisor who works with too many clients might not be able to give you the level of service you want or deserve. Conversely, an advisor with too few clients could be struggling or be unseasoned.

7.  Have you or anyone in your firm ever been subject to disciplinary or legal actions?

A ‘yes’ answer should serve as a warning.

Questions to Ask Your Advisor About Fees

8. What fees do you charge?

Fee structures vary significantly. Ask what the fees are, how they’re calculated and details about how the advisor is compensated. (For more, see: Choosing a Financial Advisor: Suitability Vs. Fiduciary Standards.)

9. Do you receive any commissions or incentives?

Delve further into advisor compensation by asking whether the advisor receives any commissions or incentive payments related to advice rendered. You want to know that the advice you receive is in your best interest, not in the advisor’s financial interest.

10. What services will I receive?

Some advisors are solely investment or money managers, whereas others only focus on financial planning. Wealth managers combine both investment management and financial planning in a cohesive manner.

11. Will my investment returns be reported net of fees?

Ask how investment returns are reported, either gross or net of fees. Net of fees is preferred to more accurately reflect performance.

Questions to Ask About Your Advisor's Investment Strategy

12. What’s your investment philosophy?

Inquire about the investment philosophy, including examples that relate to you. At the end, evaluate if you are able to understand how the advisor speaks to you. Carefully evaluate if the advisor invests in a broad array of asset types or if the advisor only specializes in one or two areas, which could leave you vulnerable. Also, be careful if the advisor engages in market timing, as making the wrong timing decision can dramatically impact returns, either positively or negatively.

13. How would you invest my portfolio?

This question gets to the heart of whether the advisor has taken the time to get to know you and if you’ll receive personal investment attention. If the advisor invests in the same fashion for all clients or offers an answer without knowing much about your finances, both are potential red flags. Ideally, an advisor should only provide investment advice after taking the time to learn about your finances, long-term goals, risk tolerance and more.

14. Will I have to sell all of my investments?

Some advisors require you to sell all of your investments, regardless of tax consequences. This should be carefully evaluated, including the tax costs.

15. How often will you review my accounts?

Ask how often the advisor will formally review your accounts. Ideally, the answer is no less than once per quarter.

16. Where will my accounts be held?

It’s important to know who will maintain custody of your accounts and assets. Many advisors use third-party custodians, such as Charles Schwab, TD Ameritrade or Fidelity Investments. A third-party custodian offers a checks-and-balances system to help preclude potential improper accounting.

Questions to Ask Your Advisor About Financial Planning

17. What aspects are included in your financial planning?

Some financial advisors only provide retirement planning services. Others are more comprehensive addressing all areas of financial planning such as taxes, asset protection, estate planning, college savings, etc.

18. Do you charge additional fees for a financial plan?

Many advisors charge additional or separate fees for financial plans, which might dissuade you from updating your plans. Ask how they charge for financial planning or what might be covered as part of a broader fee arrangement.

19. How frequently will you update my financial plan?

Some advisors only prepare a financial plan at the beginning of a relationship, but ideally your advisor will update planning on a more frequent basis. This helps you evaluate how life and investment changes are impacting progress toward your financial goals.

20. Does your planning software incorporate tax planning?

Many financial planning systems take an easy approach to tax calculations by using an effective tax rate, which holds the percentage of income you pay in taxes fixed each year, regardless of changes in your income, deductions or other variables. This calculation process can result in grossly inaccurate results. It’s best if the program embeds full tax planning each year, effectively replicating your tax return, based upon factors that change as projected in your planning assumptions.

If you’re embarking upon the search for a financial advisor, ask each of the advisors you meet the same list set of questions to enable a fair comparison and to help you make an informed decision. You can print the list of questions here. (For more from this author, see: Financial Planning Checklist for Beginners.)


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