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10 Questions to Ask a Wealth Advisor Before You Hire Them!
Searching for a new financial advisor? How can
you tell whether the advisor has the right experience and knowledge to help
your family achieve your financial goals? Below are the top 10 questions we
would encourage you to ask any potential financial advisor, financial planner,
or wealth manager before you hire them.
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What experience do you have?
Ask about his or her philosophy, previous work experience and results. Ask the planner to
briefly describe her work experience and how it relates to her current practice.
Choose a financial planner who has a minimum of three years experience
counseling individuals on their financial needs. |
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What are your qualifications?
A “financial planner” is a broadly used title and does not confirm any
specific education or training. There
are 18,000 people who call themselves a financial advisor, but only 6,000 who
are certified. A lawyer goes to law
school, a doctor went to medical school. The industry has many professional designations, but the Certified
Financial Planner® (CFP®) is the highest mark for a
financial planner. In the absence of a
respected credential, ask what qualifies them to offer financial advice. Ask about continuing education, and how they
stay current in the financial planning field. |
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What services do you offer?
Ask what services are offered, and if they match your needs. Specifically, does the financial planner
offer only investment guidance, financial planning, or both. Some investment advisors tailor a portfolio
to each client’s specific situation, others simply provide a template
investment plan that is applied to each account not taking tax efficiency into
account. Some planners offer financial planning advice on
all parts of a client’s life. Others may
provide advice only in specific areas such as estate planning or on tax
matters. |
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What is your approach to financial planning?
Most financial planners have a typical client profile and financial
situation they like to work with. Some planners offer proactive and comprehensive planning guidance; others work reactively on a project basis. Many financial advisors state in their
marketing materials they offer financial planning services, but the depth of a
plan may be a generic report provided by software and may lack several pieces
important to you. A truly comprehensive
planning service will coordinate all disciplines of the financial planning
process such as: cash flow and
budgeting, retirement planning, goal setting for college savings and school
selection, tax return reviews and minimization strategies, objective insurance
needs analysis, estate plan discussions and design, and effective charitable
strategies. |
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Will you be the only person working with me?
Ask who will be your main contact and who else might be working with
you. Be sure you meet the person or team you will work with to ensure you are comfortable with them. Also ask how frequently your point of contact
may change and what could trigger this. Some examples of contact changes may be employee turnover, growth of the
firm they are employed by, or ideally, growth of your plan and the complexity
of your needs. |
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How do I pay for your services?
Nobody works for free, so it’s important to understand how the advisor is paid and consider any conflicts that may arise.
- Fee-only. Advisors are paid a fee for service, with absolutely no commissions paid from the sale of financial products (e.g. partnerships, mutual funds, insurance products, etc.)
- Commissions. Advisors are paid on commission based upon the sale of products to you. On the surface, these advisors may appear to work for “free”.
- Fee-based. Not to be confused with fee-only, a fee-based advisor charges a fee and they collect commissions from product sales. Advisors compensated with fees and commissions are not always bad; It’s important to understand if they are double dipping or if any fees you pay are offset by commissions they may have received.
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How much do you typically charge?
Always ask for an estimate,
based on your needs. The estimate could be an annual fee % rate, an hourly
rate, flat fee or estimate of commissions. Most fee-only firms charge a % of assets under their management, so
request to see their fee schedule or research their Form ADV on file with the SEC. |
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Could anyone, besides me, benefit from your recommendations?
Ask about potential conflicts of interests. Does the planner receive
fees based on referrals or do they participate in company incentive programs? |
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Have you ever been publicly disciplined for any unlawful or unethical
actions in your professional career?
Check for disciplinary actions for CFP practitioners on the CFP website. Be sure they are
registered with the state or the U.S. Securities & Exchange Commission. The
planner must be able to provide you with a disclosure form, Form ADV Part II,
or the form’s state equivalent. |
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May I have that in writing?
Have the planner give you a written agreement, detailing the services to
be provided. Keep this document in your files. |
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