Ten Questions to Ask Your Financial Advisor
These questions will help you find an advisor who is qualified to meet your needs.
1. What experience and qualifications do you have?
Find out how long the advisor has been in practice and with which companies he has been associated. Ask for a brief description of work experience and how it relates to the advisor's current practice. Ask what licenses and other financial services credentials the advisor holds. Find out how the advisor stays current with changes and developments in the financial planning field. CFP® professionals, for instance, expand their knowledge and stay up-to-date through mandatory continuing education courses.
2. Will you provide me services with the "duty of care of a fiduciary?"
As a fiduciary, an advisor is obligated to base her recommendations on your best interests and disclose any conflicts of interest. Ask to see it in writing. If the advisor avoids the question, does not understand the term or cannot show it in writing, go elsewhere.
3. What services and products do you offer?
Services offered by financial advisors vary greatly, depending on a number of factors, including credentials, licenses and experience. Make sure the advisor offers the services you require, does real financial planning and is not merely selling products. Be sure to ask what products the advisor can sell to you; e.g. life insurance, variable annuity, indexed annuity, etc.
4. What is your investment philosophy?
Ask how the advisor selects investments and what types of investment products he uses. Find out whether the advisor will carry out the financial recommendations or refer you to others to implement his recommendations.
5. How are you compensated?
Ask for a written description of how the advisor will be compensated for each service you are seeking. You are looking for potential conflicts of interest with this question. If she avoids or minimizes the question, go elsewhere. Note: by definition, an advisor cannot be "fee-only" and also sell products (#3 above).
6. How much will I pay for your services?
Ask for a detailed list of the fees, charges and other costs for services.
7. Could anyone besides me benefit from your recommendations?
Some advisors have business relationships or partnerships which could affect their professional judgment, potentially preventing them from acting in your best interest. Ask the advisor to provide a description of potential conflicts of interest in writing. For, instance, if the advisor recommends an estate-planning attorney, will the advisor benefit financially from the recommendation?
8. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
Several government and professional regulatory organizations, such as the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), your state insurance and securities departments and the CFP Board, keep records on disciplinary history.
9. What happens if you step out onto the street and get run over by a bus?
Here, you are checking to see if the advisor has a plan in place to take care of your needs if she should die while she is your advisor.
10. What is your succession plan?
Ask the advisor what plans he has for his retirement and how the transition of your accounts to a new advisor would take place.