10 Important Questions to Ask a Financial Advisor

Two women sitting together for an interview: 10 Important Questions to Ask a Financial Advisor

Choosing a financial advisor is much like interviewing for a job, except you make the final hiring decision. Not all financial advisors offer the same services, so it takes work to find the perfect fit. Anytime finances are involved, making the right decision can feel overwhelming. But, asking the right questions can help you feel more confident with your choice. Read on to find ten important questions to ask a financial advisor.

If you have additional questions afterward, remember to contact our team at Good Life Mt. Pleasant for a free consultation.

1. Will You Act as a Fiduciary?

One of the first questions to ask is whether an advisor is a fiduciary or non-fiduciary. The fiduciary standard is the highest level in finance and requires advisors to make recommendations only in the best interest of their clients.

Non-fiduciary advisors are held to the suitability standard, which means recommendations must fit an individual client’s investment profile and goals. Still, they don’t necessarily need to be the best choice. For example, if two different investments fit the profile and one earns the non-fiduciary advisor a commission, you can guess which one will be recommended.

2. What Qualifications Do You Hold?

An advisor’s qualifications can tell you a lot about what type of service you can expect to receive. For example, if the advisor is a Certified Public Accountant (CPA), they likely have excellent knowledge of business law and the tax code. On the other hand, an advisor with a Certified Financial Planner (CFP) designation probably excels more in family finances or estate planning.

3. What Is Your Education and Experience?

Fiduciary advisors like CFPs and CPAs must undergo extensive schooling and accumulate professional experience before practicing independently. This means thousands of hours of apprenticeship or other similar work experience, a degree from an accredited university, and the passage of a complicated exam. Therefore, it can be constructive to learn where your potential advisor was educated and how they attained the required work experience.

4. How Will I Pay?

Advisors don’t work out of the goodness of their hearts, and how they receive payments is a clue to the type of services they provide. Advisors who earn commissions operate under the suitability standard and aren’t required to act as fiduciaries. One key feature to understand is the difference between fee-based and fee-only advisors. A fee-only advisor is only paid by their clients thoroughly hourly, flat, or AUM percentage fees. A fee-based advisor may earn commissions in addition to fees for assets under management or an hourly rate.

5. Do You Provide the Services I Need?

Once you’ve narrowed down the type of advisor you’re looking for, consider the essential services you want to receive. For example, are you looking for tax and estate planning or building a sophisticated investment portfolio? Ask about an advisor’s area of expertise to ensure they specialize in your required services.

6. What Is Your Investment Philosophy?

Clients will have different financial plans based on their own goals and risk tolerance, but individual advisors still have overarching philosophies they can apply to portfolios. Is the advisor solely interested in US-based investments, or do they invest internationally? Are traditional assets like stocks and bonds the totality of their portfolios, or do they invest in commodities or cryptocurrencies? Are they primarily bullish or mostly bearish? Do they allow politics to influence investment decisions? All these questions will reveal some information about how the advisor views markets and investing.

7. How Often Will We Communicate?

Communication is crucial when forming an advisor/client relationship; the amount of communication usually varies based on the required services. For example, a client with an aggressive investment portfolio likely needs constantly open lines of communication with their advisor. On the other hand, a retirement saver building a nest egg may only need to meet with their advisor quarterly or semi-annually.

8. How Will I Keep Track of My Investments?

Transparency should be important to advisors and clients alike. Discuss how and where your capital can be tracked when talking with an advisor. Which investment platforms will be used? How can to check my nest egg electronically? You don’t want to be checking your stock portfolio every day, but understanding how to view your investments without needing the advisor’s assistance should be mentioned.

9. Where Will My Money Be Kept?

If your advisor actively manages your capital, you’ll want to know where that money is being held. Most advisors use a custodian, a separate financial institution like a bank or brokerage where client capital is safely stored. An advisor managing money without a custodian can be a red flag.

10. How Do You Provide Your Clients with Confidence?

An advisor’s job is to manage money efficiently while providing clients with understanding, guidance, and confidence regarding their finances. A good advisor will show clients how their money is being invested and why it’s the best allocation for their specific goals. Opaqueness isn’t a quality you want in an advisor – don’t be afraid to ask how they would assuage you during a severe bear market or economic downturn.

Find Your Answers at Good Life Mt. Pleasant

We hope that these questions arm you with the knowledge you need to choose a financial advisor who is right for you! Remember, the more questions you ask, the more likely you are to find your perfect match.

If you’re ready to start your search for personalized wealth management and financial planning services, Good Life Mt. Pleasant is here to help. Through an initial consultation and an ongoing relationship, we will work closely with you to understand your current situation and lead you toward solutions that can help you reduce risk, build wealth, and be prepared for key milestones. Contact us today to learn more!