Are you thinking about hiring a financial advisor, but aren’t sure what questions to ask them to see whether or not it’s a good fit?
Or are you curious if your current advisor is still a good fit for your individual situation?
If you answered, “Yes,” to either of those questions, then you should definitely keep reading.
When prospective clients call my office, I always encourage them to interview at least two or three advisors before deciding on one. But it doesn’t matter how many advisors you interview, if you don’t ask the right questions!
With that in mind, below is a list of twelve key questions to ask a financial advisor you’re considering hiring, as well as what answers I would give if a prospective client asked me these questions.
At the end of the post, I’ve also included a link to a PDF file with the 12 questions to ask a financial advisor listed below, along with some blank space below each question. That way, you can print out a blank copy and take it with you as you interview the financial advisors you’re considering hiring.
So, without further ado, here are 12 questions to ask a financial advisor before signing on the dotted line…
(Note: This list was adapted from a list of questions originally found on the public section of the website for the National Association of Personal Financial Advisors here.)
1. How will you assist me in reaching my financial goals?
I’ll start by asking, “What ARE your financial goals?”
An advisor should never tell you how to reach your financial goals without first knowing what those goals are and why they’re important to you or you and your family.
This is why one of the first meetings I have with a prospective client is something I call the “Introductory Meeting.” During this 60-90 minute complimentary meeting, we walk through a list of questions covering seven key areas of your financial life (i.e. goals, values, assets, relationships, etc.) to see whether or not my firm can provide value to your financial situation and whether or not it makes sense to move forward with a possible advisory relationship.
Then, and only then, can we map out a detailed “preview” of what it would look like to work together and the ways in which I can help you reach your financial goals.
2. How are you compensated as an advisor?
I’m compensated on what’s known as a “fee-only” basis. This means I do NOT sell products, nor do I accept any commissions, 12b-1 fees, or any other third-party fees that tend to increase the conflicts of interest inherent in most “commission-based” or “fee-based” advisory relationships.
I’m paid by YOU, the client and only you.
This allows me to remain as independent and objective as possible when developing and implementing investment and financial planning recommendations.
3. If you accept commissions, will you provide an itemized list of the amount of compensation you earn from the different products you recommend to me?
I do NOT accept commissions, but I would still be happy to provide an itemized list of fees and expenses you may incur as a client.
Check out the posts found here and here for a long list of hidden investment fees to be wary of when choosing an advisor.
Regardless of how an advisor is paid, a good advisor will be happy to help you understand their fee structure and provide you an itemized list of the fees you’d be likely to pay if you were their client (both fees directly charged by the advisor, as well as the “hidden” fees mentioned in the posts listed above).
4. Do you accept or pay any referral fees?
No. See related answers from questions 2 and 3 above.
As you can probably tell by now, I’m not a big fan of any third-party fees because they tend to increase conflicts of interest and these fees are rarely, if ever, in the best interests of the client.
5. Are you held to a fiduciary standard of care at all times?
Yes. I’m legally, ethically, and morally required to act in your best interests at all times.
NEVER EVER hire an advisor who will not commit to acting as a fiduciary at all times!
You can learn more about what a fiduciary is and why hiring a fiduciary is important in this blog post.
6. Will you sign a fiduciary oath to put my interests first at all times?
A PDF copy of the fiduciary oath I currently use with my clients is located here.
7. What are your professional credentials and experience?
I started SageOak Financial, LLC in January 2013 and I’ve been helping people with their personal finances for almost a decade.
I’m a CERTIFIED FINANCIAL PLANNER™ professional and I earned a Financial Planning Certificate from Northwestern University in Evanston, IL.
I also hold a Master of Business Administration degree (MBA) from Oklahoma State University in Stillwater, OK and a Bachelor of Science (B.S.) degree from Indiana University Purdue University of Indianapolis (IUPUI) in Indianapolis, IN.
Prior to starting SageOak, I worked remotely with advisory firms in Florida and California. In addition, before entering the financial planning field, I worked in intercollegiate athletics as a college golf and basketball coach at a small college in Kansas.
You can learn more about my personal and professional background here.
8. Have you ever been disciplined by the SEC or FINRA?
If a prospective advisor you’re considering answers, “Yes,” to this question, that should be an immediate red flag and you should probably look for another advisor!
9. Do you provide comprehensive financial planning? Or do you only offer investment management?
Just like a doctor wouldn’t develop a treatment plan after only listening to your heart, a good financial advisor will develop a plan that takes into consideration all areas of your financial life before making any recommendations.
In most cases, I recommend a comprehensive financial planning engagement because investments are just one piece of your overall financial life.
With that said, if a client strongly desires investment management on a standalone basis, I’m happy to provide that service.
10. What is your investment philosophy or style?
Unlike most advisors, the investment philosophy I adhere to is based on facts and not feelings. It’s backed up by decades of Nobel-prize winning research in the field of financial science and is rooted in timeless financial wisdom and principles.
If you’d like to learn more about our investing philosophy and approach, you can learn more here, here, and here.
We also cover it in detail with prospective clients during our complimentary Discovery process.
11. Do you have clients similar to my age or stage of life?
Currently, I have clients ranging in age from approximately 30 to 80 and ranging in life stage from early in their working years to late into retirement.
So, yes, in most cases, I have clients (or have previously served clients) that are in a similar age and stage of life to yours.
When I come across a client who I don’t think I’m equipped to serve properly, I don’t hesitate to refer that individual to another advisor who would be better suited to handle their financial planning needs.
12. What happens to our relationship if something happens to you?
If a situation occurs that prevents me from providing a high level of ongoing service to my clients (such as an unlikely premature death or disability), I have a formal agreement in place with another advisor in the Tulsa, OK area who can take over the day to day management of client accounts directly or, if you prefer, will assist you in finding a new advisor.
When choosing an advisor, it’s wise to hire someone who’s going to walk alongside you through the ups and downs of life. In other words, I strongly advise hiring someone who will be around for a long, long time.
Did you know, however, that the “average” financial advisor’s age is approximately 51? And only 11 percent of advisors are under the age of 35?
What this means, is that if you’re in or nearing retirement, odds are high that your advisor is too!
If you hire an “average” advisor, it’s very likely that sometime in the next 5-10 years, you’ll be searching for another advisor after your current one retires. And if you’re in Generation X or Y, it’s not only likely, it’s an almost certainty.
If, however, you’re fortunate enough to work with a younger advisor, he’ll likely be there to walk alongside you through the rest of your working years, retirement, and beyond!
“12 questions to ask a financial advisor” resources
Below are links to two resources you might find helpful as you interview prospective advisors…
- Blank PDF copy of “12 Questions to Ask a Financial Advisor” for use while interviewing advisors
- A PDF copy of the fiduciary oath I use with clients
As always, if you have questions about something in this blog post or anything else related to reaching your financial goals, feel free to leave a comment below or email me at anytime.
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Together, we’ll explore whether or not an ongoing advisory relationship makes sense in your situation!