Are you getting ready to meet with a financial advisor but have no clue what to ask? Here are five essential ones you can take with you to take the temperature of a new advisor and see if you’re the right fit.
How Do You Get Paid?
This is the most important question on this list because it directly reveals the advisor’s business model. It’s also a pretty good insight into where their loyalties lie. There’s a big difference in approach between an advisor with a fee-only model and a commission-based one.
Fee-only models are the most transparent; you’ll always know exactly what you pay upfront. Commission-based models aren’t as clear-cut, and usually mean that part of the advisor’s income relies on selling you things. It doesn’t mean you can’t work with advisors who operate this way; it’s just good to be aware of it so you can ask for transparency.
What Are Your Credentials?
Don’t be afraid to ask the advisor for proof that they’re good at their job. This could be credentials, professional certifications, or, ideally, both. The most common and respected credential is the Certified Financial Planner (CFP), so you’re usually in good hands with an advisor who has this.
It might seem awkward to talk about this at first, but any advisor worth their salt won’t bat an eye. And if they do get uncomfortable, that’s probably a sign that they don’t have much to show you.
Who Is Your Typical Client?
Asking an advisor about their typical clients gives you a sense of what kind of people they help. You want an advisor who has experience working with people similar to you. An advisor who primarily works with high-net-worth retirees may not be the best fit if you’re a young professional just starting to save for a home.
Some financial advisors have a broad clientele, so it’s important to dig deeper into your specific goals and challenges before you write them off solely on who they serve.
How Do You Handle Conflicts of Interest?
You want your advisor to act in your best interest at all times. The keyword here is your, not theirs. Fiduciary advisors are specifically (and legally) bound to this principle and will always put your needs before their own.
But some follow a “suitability” standard. This means that they’ll recommend products that are “suitable” for you, but not necessarily the best option. Either way, this is something to know before you let them handle your money, because you want to be clear about how they handle situations that could conflict with their compensation.
What Services Do You Provide?
A good financial planner goes beyond investing. They should have a more holistic approach to finances so you can have the same person managing your portfolio and providing guidance on retirement.
This is better for streamlining services, but it’s also useful for having one person oversee how each account or investment interacts with another. Plus, it’s exhausting to have to hunt down multiple specialists when your advisor could be (and should be) a one-stop shop.
