What to Ask a Financial Advisor

By Justin Pritchard, CFP®

Thinking of working with a financial advisor? Ask these questions to find out if you’re talking to the right person.

The questions below can get you started, and the explanations provide context answers from prospective advisors. Remember, if you don’t understand something, there’s nothing wrong with asking for clarification. Changing advisors is a pain, so it’s best to get all of the details right.

If somebody gets dodgy when you ask for more details, that probably tells you everything you need to know. But if an advisor is open and honest, making a genuine effort to help you understand what your relationship might look like, that’s a good sign. The same is true of those who clearly explain how much they earn from working with you.

Bonus: See retirement-specific questions you need to ask if your primary need is retirement planning, and see my answers at the bottom of this page.

Summary:

  1. Are you a “fiduciary” with all clients at all times?
  2. How do you earn money?
  3. How long have you been working directly with clients?
  4. How often will we meet to discuss my finances?
  5. Do you have a clean regulatory background?
  6. What kind of experience do you have with goals like mine?
  7. What education and certifications do you have?
  8. Can you help with needs besides just investment management? How does that work?
  9. What is your approach to investing and/or planning?
  10. For asset management clients, what is your typical client size?
  11. Will I work with you directly, or with a junior advisor?

“Trick” questions:

  1. How much will I make?
  2. What’s your investment performance like?

Are you a “fiduciary” with all clients at all times?

A fiduciary financial advisor is required by law to act in your best interests, minimize and disclose conflicts of interest, be transparent about costs, and otherwise do what’s right. But most “advisors” (including people who might call themselves financial planners, financial consultants, brokers, and more), are not fiduciaries.

You use the word fiduciary, but is that always the case? Some advisors are sometimes fiduciaries, and sometimes not. They might be able to act as salespeople—not acting in your best interest—while displaying the word “fiduciary” on marketing materials and in fuzzy conversations they have with you. To avoid problems, it’s prudent to work with somebody who is always a fiduciary. They cannot earn hidden commissions or win a vacation as part of a sales promotion. They can’t (legally) bait-and-switch with the promise of fiduciary services. Instead, they just give you the help you need and charge a fair price.

How do you earn money?

Ask financial advisors how they charge clients. You can pay for financial advice in a variety of ways. Perhaps the most dangerous way to do so is to work with somebody when you don’t know how they earn money or how much they’re charging you. When somebody says “there are no fees,” proceed with caution.

Woman raising hand, asking a financial advisor a questionCompensation models can fall into one of these categories:

Fee-only: Advisors charge a project-based fee, hourly fee, asset-management fee, or other flat fees to provide services. In this model, there are no commissions, so advisors don’t just select products that pay the best commissions. Fee-only planners can get paid whether you invest money or not—which means they’re more likely to give you unbiased advice.

Commission: When you buy something, a salesperson earns a commission. Whether or not you see that commission or know how much it is depends on numerous factors. The potential problem here is incentives: When somebody’s livelihood depends on you buying a product, there’s a good chance that they’ll promote that product heavily. That isn’t always done with malicious intent, and a salesperson may genuinely believe that they’re providing the best option available. But your universe of options is dramatically narrowed, and there’s a tendency to steer you toward commission-paying products that the salesperson has “in inventory.” 

Fee-based: A fee-based advisor can earn both fees and commissions. The term is often confused with fee-only, but they’re different. A fee-based financial planner might be a fiduciary at some times, and might be a broker at other times.

Biases can exist below the surface of an advisor’s awareness. After all, advisors need to make a living, and they may practice selective ignorance. Whether or not your advisor is a nice person, you pay the price.

How long have you been working directly with clients?

When it comes to your finances, experience may be important. To be sure, some new entrants into the industry have a fresh perspective and they’ve recently learned topics in-depth that could help with your plan. But my opinion is that it’s ideal for an advisor to have experience on their side.

As you ask about experience, be sure to drill down into client-facing experience with the topics you need help with. Somebody might have worked for an investment or other financial firm for a long time, but unless they were helping clients like you, their day-to-day work was probably different from what you need. That’s not to suggest that they’re clueless—and life experience is also important—but if somebody lacks experience, be sure they can make up for it somehow.

Scroll down for more questions, or watch an explanation by video.


How often will we meet to discuss my finances?

Find out what your experience as a client will look like. Do you need to proactively contact your advisor periodically, or do they reach out to you? Does the frequency of contact vary throughout your relationship, or is there a rigid system in place? 

One and done? Some advisors are eager to win your business, but they disappear after you transfer money to them. If that’s not what you want, listen for cues as you ask about the client experience. During your interview, ask what they’ve been doing during recent events, and ask if they’ll provide a copy of a generic communication (without any confidential client information).

How much is right? Consider how much contact you really want with your advisor. During the beginning of a relationship, especially when advisors help you with financial planning, there may be a lot of contact: Discussions about your goals, follow-up questions, conference calls to your service providers, and more. But what do you want after that? Do you want to sit in the same room with them every three months, or are you satisfied with a few phone calls or video discussions per year? Does the advisor send emails with tips and ideas throughout the year to help you manage your finances?

Do you have a clean regulatory background?

This is something that clients often fail to ask their advisors. In addition to asking, you should verify for yourself. To do so, run a web search with the advisor’s name, looking for headlines about criminal charges or behavior. Also, view regulatory reports that contain important information, which you can access at the SEC’s website.

If somebody has negative marks in their history, that’s a signal to use caution. Ask the advisor what happened, and decide if you’re comfortable with the answer. For severe violations (stealing money, etc.), it’s probably best to move on quickly.

What kind of experience do you have with goals like mine?

An advisor might be really smart, but if they don’t work in the universe you need help with, they might not be the right fit. Sure, they can figure anything out (and the same goes for you), but that takes time, and there’s a risk of missing details. If you want help with retirement, work with somebody who focuses on that topic.

What education and certifications do you have?

Again, smart people can figure out almost anything. But there’s something to be said for education and certifications that can help with your finances. Always look for an advisor who is a Certified Financial Planner (CFP®) professional. That designation, considered the “gold standard,” entails:

  • Several years of experience helping clients.
  • A set of required courses covering a broad range of financial topics.
  • A clean background
  • High ethical standards and practice guidelines
  • Ongoing continuing education requirements
  • A fiduciary requirement with 15 elements
  • A rigorous test (when I took it, was on paper over two days, and roughly 49% of people failed)

After passing that hurdle, it could make sense to look for additional certifications specific to your needs. For example, if you want somebody to evaluate the fundamentals of individual stocks for you, it may be helpful to work with a Chartered Financial Analyst.

Did you know: In many cases, the only requirement to be a financial advisor is to pass two short tests—and you only need to score 70% to pass? The tests primarily cover securities laws—not financial planning topics.

Is this legit? Be wary of designations that are designed to make you think an advisor is skilled and knowledgeable. Some advisors buy designations that sound lofty, but they’re awarded as soon as you pay for them (with minimal—or nonexistent—standards and requirements).

Can you help with needs besides investment management (financial planning, conference call with my credit union to get answers on issues, etc.)? How does that work?

Are you looking for holistic help? Some advisors almost exclusively manage money, which may leave you wanting.

While that may provide efficiency, it’s a pretty narrow offering. If you need more than just somebody to hand your accounts over to, make sure you can get what you need. Some advisors don’t have the knowledge or desire to talk about bigger picture topics, and some are not allowed to do so because their employers prohibit broader discussions. Ask financial advisors about the variety of topics they’ve helped clients with recently.

What is your approach to investing and/or planning?

Ask out what the “deliverables” will look like when working with an advisor. 

Investment-related questions:

  • Do they invest in individual stocks and bonds (specific companies, for example), or do they use mutual funds and ETFs to diversify?
  • Do they use active or passive investments?
  • How often will they trade in your accounts?
  • Do you pay fees every time they trade?
  • Where will your money be, and how can you view your accounts? (Never work with somebody that you write a check directly to. Instead, your funds should be at a reputable custodian like TD Ameritrade, Schwab, Fidelity, or other big names)
  • Can I set restrictions on the investments you use?
  • Do you offer socially-responsible investments or ESG in my accounts?
  • Do you offer your own firm’s investment products, or are you completely independent in your product selection?

Financial planning related questions:

  • What information will you need from me?
  • How long does the process take?
  • What will I receive (is it a one-page summary, a 70-page volume, etc.)?
  • Will you provide investment advice as part of a planning engagement?
  • How much will this cost?
  • Do you offer one-time, ongoing, or other planning arrangements?
  • What happens when life changes and we need to make an update?
  • Which topics are included (taxes, cash flow, budgeting, estate planning, retirement, education funding, debt strategies, real estate, investments, insurance and risk management, etc.)?

For asset management clients, what is your typical client size?

If you hire an advisor to manage your investments, find out how your accounts compare to other clients. This isn’t the “bad” kind of comparison with others—it’s helpful to know where you stack up for the advisor’s time and attention. Plus, at certain asset levels, your finances get more complex, and you may want an advisor familiar with the challenges you face.

In some cases, the difference between a large and small client might not be as relevant as we think.

Will I work with you directly, or a junior advisor?

You may want to have a lifelong relationship with an advisor (assuming all goes well). But if you don’t meet the person you’re actually going to work with day-by-day, it’s hard to make a decision. Find out how the firm works and who you’ll have access to.

If you’ll work with a junior advisor, find out about their background, education, skills, and philosophy.

Trick Questions

You can also ask questions that have no real answer. But your (prospective) advisor’s style of responding can tell you a lot about who you’re working with.

How much will I make?

There’s no way to know what your investments will earn. It’s a reasonable question for clients to ask, but the only reasonable answer is “I don’t know,” or something similar. For many clients, the returns will be similar to what the market does—adjusted for your level of risk. Most clients don’t invest 100% in stocks, so your returns won’t match the markets perfectly. And sometimes, if you’re properly diversified you’ll be invested in areas that don’t do well. That’s an unfortunate reality for smart, long-term investors.

Be careful if an advisor suggests that they can deliver certain results, that they’ll “beat the market,” or that you can expect to outperform. You may be dealing with somebody who is overconfident or who is willing to say anything to get a new client.

What’s your performance history?

Again, it’s understandable when clients ask this, but advisors need to use great care when answering. Each client or investment model may be different. Plus, next year will be different from last year, so past performance is no indication of what you’ll actually earn in your accounts. Advisors might discuss an investment model that would fit with your profile, and we often look at long-term capital markets assumptions based on reasonable research. But pay attention to any (lack of) hedging language. Advisors should make it clear that things change constantly, and there’s no telling what you’ll earn.

A skilled advisor should help you shift the conversation to your needs and circumstances (or your “goals”). You can only control how you invest, and the markets will do their own thing.

My Answers

Photo of Montrose Financial Advisor Justin Pritchard, CFPYou’ve read a lot already, so we’ll keep this brief:

  1. Are you a “fiduciary” with all clients at all times? Yes, I only work with clients as a fiduciary.
  2. How do you earn money? I am a fee-only financial advisor, and my pricing page has details on compensation.
  3. How long have you been working directly with clients? I’ve been working with individual clients (helping people plan and invest) for over 15 years.
  4. How often will we meet to discuss my finances? As with the explanation above, it depends. There’s a lot of work up front, and we typically talk several times per year, although each client is different.
  5. Do you have a clean regulatory background? Yes.
  6. What kind of experience do you have with goals like mine? I primarily work with people who are planning for retirement or in retirement. 401(k) plans are another area I’ve spent a lot of time in.
  7. What education and certifications do you have? I am a Certified Financial Planner (CFP®) practitioner. I have an MBA and an MSIS, which help me understand the business world and work efficiently. I have completed other courses and programs, as well. For example, I’ve satisfied the requirements for the retirement-focused RMA® designation and the CFT-I™.
  8. Can you help with needs besides investment management (financial planning, conference call with my credit union to get answers on issues, etc.)? How does that work? Yes. For ongoing client relationships, I usually include that type of assistance. For one-time projects, I quote a price and tell you what we can do together. That often includes 3-way calls to a financial institution to help you get things done.
  9. What is your approach to investing and/or planning? This is a big question. To keep it brief, I help people project how the future might unfold, primarily related to retirement. Relationships are either one-time or ongoing. When I manage assets, I usually consider that an ongoing relationship. For investments, I use low-cost mutual funds and ETFs. They are primarily passively managed, but not exclusively.
  10. For asset management clients, what is your typical client size? Most clients have between $100,000 to several million, but there are certainly exceptions.
  11. Will I work with you directly, or with a junior advisor? You work directly with me.

If you’d like to learn more about working with me, let’s just talk—there’s no cost or obligation to chat. Please send an email to start the conversation.

If that feels like a bigger step than you’re up for, start by getting more free information from me. You’ll learn a lot about retirement planning, and you get easy access to tips and videos over the coming weeks and months. If you decide you don’t care for it, it’s extremely easy to opt-out at the bottom of every message.

Wow, You Just Learned a Lot!

Hopefully this is helpful. If you need to find a different financial advisor, you can find fee-only financial advisors from several other sources: