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10 Questions To Ask A Financial Advisor

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Engaging a financial advisor is like hiring someone who will be an anchor for your monetary decisions and who will lay the foundation for your investments. Not only yours, but the future of your loved ones also depends on how well your professional advisor can protect your current assets and build your future investments. So, try to be patient while selecting your ‘monetary in-charge’ and take each step of the process with calmness, consideration, and caution.

To ensure you get the right candidate, here are 10 questions you must ask an advisor before hiring them:

Question 1: What certifications and qualifications do you hold?

You would not like to hire a person who is not eligible or worthy of providing advice. Your investments, assets, properties, retirement accounts, etc. are your precious savings for the future and putting them in the hands of an individual who is not qualified can prove detrimental. Hence, the first question you can ask a financial advisor is about their certifications. It helps to choose a Certified Financial Planner (CFP) since these professionals hold the necessary qualifications, education, experience, and ethics required for the job. You can also consider individuals that have the Personal Financial Specialist (PFS) designation. These people have expertise in advanced tax-planning and are qualified to provide monetary advice. Based on your age or particular goal, you can further narrow down your qualification search. For instance, an RMA (Retirement Management Advisor) or RICP (Retirement Income Certified Professional) may be adequate for retirement help.

Question 2: What are your governing regulations and professional licenses?

It is advisable to hire a professional who is registered with FINRA (Financial Industry Regulatory Authority) or the SEC (Securities and Exchange Commission) and holds relevant licenses. A good financial advisor should also have the General Securities Representative or the Series 7 license. This confirms that the individual has substantial investment knowledge and is qualified to provide opinions on financial matters. Check all applicable licenses required for the services proposed.

Question 3: Do you work on a fiduciary relationship model?

The third most important question is to know where the interest of the financial advisor lies. You can look for a person who is willing to offer unbiased suggestions that ultimately lead to better results. This is possible only when the concerned individual places your interest before their own and is not biased towards a certain product. Check if your financial advisor is a fiduciary. Fiduciaries pledge to act in the best interest of their clients at all times. They are different from other specialists who may provide counsel that suits their motives and not yours. You can choose to liaise with experts who work for an RIA (Registered Investment Adviser). These people have a fiduciary duty as per the Investment Advisers Act of 1940 to serve the best interest of their clients.

Question 4: What is your expertise and what types of clients do you serve?

If your goal is more comprehensive than investment management, it is advisable to assess if the person has expertise in other domains of financial planning. It is beneficial to know your advisor’s skills in wealth management, estate planning, retirement planning, etc. Some expert services that you may look for include:

  • Retirement planning
  • Tax planning
  • Saving for higher education
  • Cash flow planning
  • Trust and estate planning
  • Insurance planning

Additionally, try to understand what kind of clients your advisor is linked to. This may help to determine their expertise and suitability.



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Question 5: Have you been issued a warning or a disciplinary notice?

No matter how qualified or certified an individual is, a background check is vital. Knowing things such as disciplinary actions, criminal convictions, or investigations authorized by regulatory or legal authorities – can be very critical. Moreover, it would be helpful to find out if there are any inquiries set up by an industry investment group. You can cross-verify with the FINRA Disciplinary Actions Online database or other state discipline records.

Question 6: What is your payment structure?

An advisor’s fee can affect the type of advice and your budget. It is vital to know this to be sure that you are getting unbiased professional advice. Financial specialist should not steer you in a particular direction for their ulterior motives. Instead, help should be offered in good faith and by placing your interest above all other factors. A fiduciary relationship can ensure that you get unbiased financial advice.

Question 7: What will be the total cost?

The hourly costs, commissions, and flat fees are not all that is likely to go out of your pocket. There are many other kinds of fees that financial advisors charge their clients for additional services., There are costs that may not be disclosed to a client, such as brokerage and fund fees, trading costs, etc. Hence, it is recommended to inquire about all hidden costs upfront to set the right expectations from the beginning.

Question 8: What is your guiding investment philosophy?

An important factor to know about your financial advisor is their investment policy. Ideally, their policy should be in your favor, framed to suit your age, risk-capacity, current and future goals, time horizon, existing liabilities, possible stakes, etc. You could choose a risk-averse strategy or an aggressive mode. However, the crux is for both parties to be on the same page. You may also keep a tab on the asset allocation approach of your advisor. If you wish to have a diversified portfolio, you can ensure that your advisor chooses domestic and international stocks. It would also help to secure a well-balanced mix of large-cap, mid-cap, and small-cap companies.

Question 9: What will be the structure of this relationship?

Since you would be involved in a long-term professional relationship, there will be a certain pattern that your advisor will follow. This could include in-person meetings, frequent calls, email exchanges, etc. Generally, it varies from engagement-to-engagement and is dependent on the client’s preference. Hence, it is advisable to set the right tone of communication frequency and pick a mode that is suitable to your schedule. You can also inquire about your advisor’s availability at odd-hours or for emergency meetings. In addition to this, feel free to request modifications, wherever required.

Question 10: What are the gains your financial services provide?

Remember that you hire an advisor not to pay their expenses, but to reap better benefits from your investments. Hence, it is critical to know what value the advisor brings to the table. Ideally, try to understand an advisor’s investment benchmarks such as the S&P 500, etc. to set your expectations. Most advisors also provide individual estimations of where they expect to reach by the end of a particular period. Try to be wary of a person who makes flamboyant claims or assures an increase in your portfolio, or to beat market movements, or to secure you against market volatility. Such events cannot be accurately predicted and overstating claims such as these cannot be relied upon. It is recommended that you work with someone who understands your goals, risk-appetite, tenure preference, liabilities, etc. and then accordingly plans for your financial growth.

To sum it up

Selecting a financial advisor requires great trust. It is a critical decision made in the present that can either build or jeopardize your future. In this regard evaluations and considerations done with precision can help you be 100% sure of your investment choices.

If you are looking to create wealth, qualified and trusted guidance from professional Financial Advisors can be a secure way forward.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.