Questions to Ask a Financial Advisor

Rizek Housari, CPA, CFP®

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Recently I spoke with some individuals about interviewing financial advisors. We talked about what questions to ask and what they should think through before entering a relationship. 😍  That sounds like I am about to give dating advice. Well, maybe not far from it. 

Below is dating advice that might help you, a friend, or a family member in their search for that perfect someone. 😘

Thinking about working with a financial advisor? 

Before you consider teaming up with a financial advisor, it is wise to determine what services you are looking for. Some common services include the following: tax planning, estate planning, retirement income planning, college planning, investment advice, budgeting, insurance coverage, to name a few. Many advisors are limited in the services they can provide so be sure to understand what you want.

Here are some questions to consider asking that will help you make the right decision.

1. Are you a fiduciary? If so, do you always act as a fiduciary?

Not all advisors are legally bound to act in your best interest. You would think that they would be. Many sell products that are “suitable” but may not be “ideal.” Not all professionals who call themselves “financial advisors” give valuable advice. Many sell products such as life insurance or expensive annuities under the guise of “advice.” Of course, if that is what you are looking for, then they might be a good fit.

1. What conflicts of interest do you have, and how will you address them?

You can learn so much about the individual/firm you are interested in by asking this question. Be sure to listen closely and ask follow-up questions if you do not understand.

1. How do you make money?

There are two camps when it comes to paying for a financial advisor, commissions and fees.

Commission advisors are typically found at investment or insurance companies and often get paid when you buy a policy or product. The policies or products that you buy from them, the more they get paid.

Fee-based or fee-only advisors may charge a fee based on the assets they manage for you (assets under management). Alternatively, they may charge by the hour, through a retainer agreement, by the plan, or through subscriptions.

It’s important for you to understand what you are paying for and what you are receiving in return.

1. Do you offer financial planning?

Financial planning may look different with each advisor. Several advisors use an extensive list of questions and publish hundred-page reports full of tables and graphs. Some build one-page plans. Others use a back of the napkin approach that has little to do with you and your goals for life. There are even those who just focus on life insurance policies to solve all your financial problems.

1. Tell me about the type of clients you work with. Do you specialize in a specific field?

This will allow you to see if the advisor you are considering is a good fit. You may not need a specialist, but understanding their background will at least make it clear if they are the best choice to help you achieve your goals.

1. What does working with you look like? How often will we meet?

Be sure you understand what your relationship will look like going forward. A few advisors will want to talk only when you call them, and maybe not even then. 😊 Other advisors will want to meet annually to review your financial plan and build a strategy for the upcoming year. While several will only call you when they want to sell you a new mutual fund or annuity product.

Here are a few other questions that might be wise to ask:

• What is your education? What licenses do you hold?
• Are you registered with the SEC? (In the words of Ronald Reagan, “Trust, but verify.” Consider using brokercheck.finra.org or adviserinfo.sec.gov)
• What certifications do you have? Both Certified Financial Planner® or Certified Public Accountant are widely recognized in the United States.
• Will you work with my other advisors, such as attorneys or tax professionals?
• Do you have an account minimum?
• What do you expect from me?
• What are the fees of the investments you recommend?
• Are you a representative of an investment adviser or a broker-dealer?
• Are your services limited to a specific type of investment or product?
• Are there penalties or fees for ending our relationship?

There are many excellent options when it comes to working with a financial professional. Taking time to ask the right questions and performing your due diligence when interviewing advisors will go a long way in making sure you find the right fit. Find someone you trust and will enjoy working with for the long term.

It goes without saying but if you ever meet someone who is belittling, uses confusing words and phrases, or is demeaning in any way, RUN! There are too many wonderful advisors in the world.

Live life.

Rizek Housari, CPA, CFP®

Divergent Wealth Advisors LLC is registered as an investment adviser with the SEC and only transacts business in the state where it is properly registered or is excluded or exempted from registration requirements. SEC registration in and of itself does not constitute an endorsement of the firm by the commission nor does it indicate that the adviser has attained an adequate level of skill or ability.

The information contained in this material is given for information purposes only, and no statements contained herein shall constitute tax, legal, or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the needs of an individual’s situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor.

Individual clients should review with their adviser the terms, conditions, and risks involved with specific products or services. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

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