Questions To Ask Advisors

Top 11 Questions to Ask a Financial Advisor Before Hiring

Updated on May 09 2018


As you get older it’s important to get your finances in order. The help of an expert financial advisor can help you not only get organized, but also get prepared for your future. If you are looking to retire within the next ten to fifteen years, it’s especially important you set aside income each month into your retirement and investment portfolio.

According to the latest U.S. jobs report, American seniors are employed at the highest rates in 55 years. In fact, almost 19 percent of people age 65 or older were working at least part-time in the second quarter of 2017. This is partly because many Americans have not saved enough for retirement and are being forced to work longer.

Do your Due Diligence: Find a Financial Advisor Worthy of Your Money

If you want to have the freedom and flexibility to retire when you’d like, consider contacting a financial advisor or planner. Finding an expert to help you navigate the financial world is an investment that can pay off ten-fold. It is important, however, to take your time and do your due diligence to ensure you are getting the value you deserve from your advisor.

Here are top questions to ask a financial advisor to ensure you are getting the financial guidance you deserve:

1. Are you a fiduciary?

A fiduciary is someone who is legally-bound to put your best interests first. The financial services industry can be intimidating with the complicated vernacular and financial jargon. A fiduciary is obligated to ensure your money is being invested to support your unique needs. Some brokers and financial institutions have certain criteria for which investments to offer clients, so it’s important to work with someone who only has your best interest at heart.

It’s important to hold your advisor to a high standard. Ask detailed questions about why he or she is recommending each fund or investment, including whether a commission is being earned by selling it to you. Brokers are often authorized to sell certain products, which can impact objectivity.

2. What are your regulatory controls?

It’s important to ask what safeguards are in place to ensure that your financial advisor has the proper protocol in place to keep your financial assets safe and protected from fraud. Has the advisor or firm ever received disciplinary infractions for unlawful or unethical actions? How do they ensure they’re in compliance with legal and regulatory statutes? Have they received disciplinary infractions either individually or as a firm?

3. What is your experience and credentials?

Experience speaks volumes in the financial world. Find out what licenses, certifications and/or credentials the advisor has earned. Many top advisors in the industry have some of the following qualifications:

  • Certified public accountant (CPA)
  • Certified financial planner (CFP)
  • Certified fund specialist (CFS)
  • Chartered financial consultant (ChFC)
  • Chartered financial analyst (CFA)
  • Chartered life underwriter (CLU)
  • Juris doctor (JD)
  • Series 7, 24, 51, 63, 65 and 66 licenses

Learn more about financial service representatives and their credentials.

4. How often do you communicate with clients?

Proactive and transparent communication are important when it comes to trusting a financial advisor with your money. Trade notifications that explain every buy and sell decision should be sent to clients so they can educate themselves on the marketplace., Here are some other typical communications from respectable financial advisors:

  • Weekly market commentary
  • Monthly investment outlook
  • Quarterly market outlook education
  • Strategy face sheets
  • Industry updates
  • Insightful statistics
  • Information whitepapers

5. How readily can I access my information?

You should have 24/7 access to your financial information. Online account setup and access is usually the best way to see your financial information when needed, but your advisor should also explain the top holdings of the strategies you’re investing in, as well as your earnings reports – as you need to be able to make sense of the information on your own.

Here are other things a good senior financial advisor will do:

  • Answer your questions when you call
  • Proactively educate you on each strategy’s objective and holdings prior to investing
  • Help you devise an investment strategy that will allow you the financial return you need to reach your retirement goals

Communication and education are necessary ingredients in a relationship with your financial advisor. Eventually you should know and understand the strategy that goes along with your investments and understand how it ties to your family index number. You should also be informed of the investment time horizon and expected volatility.

6. How do you use technology to benefit your clients?

Not surprisingly, technology has changed the financial industry – but some advisors are still living in the past with paper questionnaires and strategies. Automation is key in the 21st century, so it’s important to ask a potential financial advisor how he or she uses technology and tech-driven tools to stay apprised of the marketplace. In order to see the big financial picture, and effectively manage it in today’s data-driven world, advisors need to be savvy with modern financial technology.

The technology the advisor uses should be taking in new financial information daily, as well as tracking changes in your account balances, transactions and holdings. Managing five to twenty financial accounts per client—including investments, credit cards, checking accounts and more—adds up. Modern technology can help a good advisor see how these pieces fit together to build a truly diverse financial portfolio that achieves your financial goals and evolves as your life changes.

7. How do you make money and what are your fees?

Every financial advisor has to make money somehow and the details will tell you whether they may have ulterior motives. If the business model is vague or takes more than 30 seconds to explain, that’s a red flag. You should never buy anything—especially financial advice—if you don’t understand the costs and fees.

Typically fiduciaries charge a management fee based on the total investment amount they are managing for you; usually between 1 to 1.5 percent. The charges should be easy to understand. Some financial planners or advisors charge commission fees every time you buy or sell a stock or mutual fund. Each trade can cost a varying amount and some advisors may be incentivized to sell different, sometimes more expense, share classes. You may also be paying additional hidden fees on the following:

  • Broker’s administrative expenses
  • Account services charges

Keep in mind that everything adds up.

8. How do you help clients with taxes?

An important service a financial advisor or planner should offer is optimizing your portfolio for tax purposes. Ask your advisor about how he or she will decide whether to allocate certain investments to your taxable account versus a nontaxable account, such as an individual retirement account.

Also ask advisors about select mutual funds as some funds tend to have high internal turnover, which can lead to capital gains. Tax efficiency can increase annual portfolio returns by up to one percent, which can equate to hundreds of thousands of dollars over 20-year period.

Investing is not just about the money you earn, it’s also about the money you keep—which is why taxes are one of the top questions to ask a senior financial advisor.

9. Who is your ideal client?

If you are specifically looking to invest for retirement purposes, you’ll want to find a financial advisor who specializes in retirement and has a big senior clientele. You can peruse reviews online to find out more about the advisor, in addition to their area of expertise and target clientele. Specifically ask candidates these questions:

  • Who is your ideal clientele?
  • How many clients do you take on each year?
  • How do you help clients prepare for retirement?

Personalized service is important and much easier if a financial advisor limits their new clients accepted each year. If you identify an ideal client profile, both you and your advisor can determine whether there is a mutual fit.

10. What other services do you provide?

In order to fully understand what your financial advisor will do for you, make sure to ask up front what services are offered. For example, will he or she provide advice on the following assets, even if they won’t be directly managed by him or her?

  • 401(k)
  • Estate planning
  • College education
  • Management of stock options

Expert advice can help you make or save money, providing added value for the fee you pay.

11. What is your succession planning?

It’s important to find out what happens to your money if something happens to the financial advisor. For example, if the advisor is with a firm, is the firm reputable? The advisor should have a detailed succession solution in place in the event that something should unexpectedly happen and the high level of service should be maintained and the same group of experts should continue to serve you for all your financial planning needs.

Finding the Right Senior Financial Advisor Is Important

You need to do your homework when choosing a financial advisor. Advisors should be able to directly answer your questions with detailed, documented proof of the following:

  • Fees
  • Standards
  • Client bill of rights
  • Code of ethics
  • A succession solution

It may not be easy asking the questions, but it’s important to set a precedence and standard for the service you expect. Your retirement portfolio and assets are one of the most important investments you’ll ever make and you want to choose someone who will help set you up for success.


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