10 Questions to Ask When Interviewing a Financial Advisor

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October is National Financial Planning Awareness Month and as the year winds down, many Americans will have questions regarding their finances. Maybe you received a windfall from stocks and want to build a more diverse portfolio, or maybe you need some help with tax planning before the IRS comes calling in April. “When To Hire a Financial Advisor” Regardless of your situation and with possible big changes for the financial sector in the coming years, there’s never been a better time to hire an advisor.

CERTIFIED FINANCIAL PLANNERS™: What You Need to Know

Finding the right advisor can be tricky since not all advisors provide the same services. You’ll need to interview potential candidates and find the best fit. It may take some legwork, but this is your financial future we’re discussing – you don’t want to entrust your savings to the first person that comes along. Here are 10 questions to ask any potential advisor to ensure you’re getting a good match.

What Qualifications Do You Have?

Financial advisors wear different hats and can serve lots of functions. Likewise, their experience and educational backgrounds can be drastically different. Some certifications require advanced degrees from accredited universities, others can be completed with a handful of seminars and examinations. All financial advisors must pass a certain milestone to achieve their credentials, but you’ll want to dig a little deeper here.

For example, CERTIFIED FINANCIAL PLANNERS™(CFPs®) mainly work with family and individual clients on retirement planning, investment management, and other areas pertaining to personal finance. If you’re looking for a way to increase your 401(k) contributions and build a nest egg, a CFP® will check the boxes. In comparison, Chartered Financial Analysts (CFAs) tend to work with institutional clients and handle large portfolios – not really what you’re looking for when attempting to squeeze some extra monthly cash out of your budget.

Are You A Fiduciary?

Credentials can tell you a lot about a potential advisor. For example, in the scenario listed above, hiring a CFP® means you’ll be getting the services of a fiduciary advisor, and fiduciaries are bound to certain codes of conduct when dispensing advice.

A fiduciary can only make recommendations in the best interest of the client or risk losing their credentials. When working with a fiduciary you can be assured that there will be no conflicts of interest like recommending high fee securities or insurance products without warrant or repercussions.

Non-fiduciary advisors must only meet a ‘suitability standard’, meaning that the recommendations must match the client’s investment goals and risk tolerance at that moment in time. But if the two investments are suitable and one earns the advisor a hefty commission, you can probably guess which will be recommended.

What Types of Services are Available?

You’ll want to know what services the advisor provides. For example, some advisors may excel in estate management and tax planning but offer little in regards to portfolio management. If you want an advisor to help you budget and save money, you’ll want someone who offers a comprehensive financial plan. Be sure to ask about the services offered before hiring someone who doesn’t fit your goals.

What Types of Clients Do You Serve?

Another distinction is the type of clientele an advisor serves. Some advisors cater exclusively to high net worth clients and the advice dispensed here is often different than that given to a middle-class family. The higher up the income ladder you climb, the more financial advice becomes geared toward tax planning, estate planning, and other forms of capital preservation. Asking about the types of clients a potential advisor deals with gives a clue about their specific areas of expertise.

What is Your Philosophy on Financial Planning?

A financial advisor isn’t going to bat a thousand when giving recommendations and advice. When it comes to financial planning, the process is more important than the outcome because outcomes can be altered by things outside of our control (like chance, etc). You don’t want to run from advisor to advisor looking for someone who only picks winning stocks. Instead, you want to look for a personality match – someone whose philosophy and values mirror your own.

Is your advisor optimistic about the future or cautious? Would they recommend a portfolio of mostly growth stocks or do they diversify into commodities like gold? Do cryptocurrencies hold any place in their portfolios? You won’t find someone who never misses, so be sure you find someone whose philosophy you agree with.

How Do Your Clients Pay For Your Services?

Ask about pay structure because not all advisors are compensated the same way. A fee-only advisor will only charge based on the services provided (ie. 1.5% of assets under management, or an hourly fee). Advisors can also earn commissions on products they recommend. Make sure the payment structure is clear before hiring.

How Much Do You Charge?

Sometimes this is answered by the previous question, but if your advisor has commissions or charges based on the comprehensiveness of the financial plan, be sure to ask exactly how much it will cost. Many advisors don’t have showrooms with price tags on their offerings, so you’ll need to ask about bottom-line figures.

Will You Be The Only Advisor I Work With?

A financial advisor is someone you want to build a relationship with. Having an advisor who knows you personally can help prevent emotional decisions and keep you on track with your goals. You don’t want a cycling team of advisors whom you don’t get to learn about on a personal level. Remember, it’s called ‘personal finance’ for a reason.

Have You Ever Been Publicly Disciplined?

Advisors, especially fiduciaries, are held to certain standards and can be disciplined or disbarred for certain transgressions. For example, CFPs® can lose their credentials if charged with any type of financial crime. Some advisors can even lose their credentials for personal bankruptcies. Asking if your advisor has ever been disciplined might sound uncomfortable, but remember you’ll be trusting your money to this person. Leave no stone unturned.

Do Others Benefit From Advice You Give Me?

Maybe your potential advisor doesn’t earn commissions, but that doesn’t mean they won’t steer you into funds or products that benefit their firm. While this might not be a classic conflict of interest, you still want to know if anyone else stands to benefit from decisions made with your money. Make sure that the only person benefiting from the advice is you.

Interviewing before hiring the right financial advisor is a crucial step in reaching your financial goals. Don’t do it alone and make sure you have someone you trust by your side the whole way.

Certified Financial Planners™ at Advanced Retirement Strategies

Working with a Certified Financial Planner™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards.

The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two Certified Financial Planners™ who specialize in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement.

If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us today.

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