10 Questions to Ask a Financial Advisor

Are you looking for help with planning your retirement? Maybe you are seeking professional advice on how to manage your budget or spendings. You may even be seeking assistance for managing your risk of investment. Whatever your reason is, a financial advisor can help guide you and assist you in making informed decisions in regards to the way that you are spending your finances. Apart from advising you, a financial advisor can also be a great means for making connections, as he or she introduces you to their professional network.

In order to find the best match for you, you will want to ask your financial advisor certain questions to ensure that he or she is the right advisor for you and your needs. Watch our video “10 questions you need to ask a financial advisor” or read our list of the 10 questions below, to really get you started in your journey with your potential financial advisor.

Fours reasons you may need a financial advisor

to help you plan for retirement.
to be introduced to their professional network.
to help you manage investment risk.
to manage budget or spend.

1. What services do you specialize in?

The first question, you can ask a financial advisor is what services do they specialize in. A few of these services might be trust and estate planning, tax planning, insurance planning, education planning, and alternative investments. It’s really important that you find the right kind of financial advisor for you that specializes in area that you truly need help with.

2. What are your investment principles?

These investment principles are critical because knowing what their investment strategy is, if they prefer diversification if they have certain asset categories that they want to invest in, if they have a high margin of safety, how they manage risk, and what kind of investment time range they typically set.

This is really important because when you’re trying to find a financial advisor, you’re really trying to find somebody who fits your mood and temperament. Also, you ultimately want to find somebody whose principles and investment strategies you can somewhat understand. If it’s too complex or sounds out of this world, that may not be the best thing for you. Ultimately, you need someone who you can understand so that you know where your money is going.

3. What life event motivated you to become an FA?

One thing that might happen is if you ask this question is you may get this response:

“My father was killed in a tragic financial plan accident. Since that fateful day, I’ve been obsessed with minimizing all risk. I wear an antimicrobial plastic or around myself to prevent unnecessary risk.”

We’re exaggerating but the point is: This is somebody who’s going to be a financial advisor for someone who’s not very risk prone. You may be somebody who would love a financial advisor like this. So ask yourself a critical question. Ask yourself, what kind of financial advisor would you most prefer? And if the response from your financial advisor is this, then you may be someone who’s not very risk prone. You may be risk averse.

4. How often do you communicate with your clients?

This is incredibly important because if your financial advisor is not going to be communicating with you the way that you want to be communicated with, it’s going to cause a strain on the relationship. Ultimately, a financial adviser somebody you want around for a very long time.

You want somebody who understands you intimately well and understands your finances. So knowing if they do monthly check-ins with their clients, quarterly, semi-annually, annually, whatever the frequency is, it’s important to get that right.

5. What is your account minimum?

Asking a financial advisor what their account minimum is also highly critical. You want to make sure that you actually qualify for this financial advisors portfolio.

If you do not meet their minimum standard, if you are not able to hit the one thousand dollars in the account, then this may simply not be the right kind of person for you. Also, you may not want to enter into an account that has too high of a minimum because it was too high then you may be putting yourself into a risky situation. So, know what it is like beforehand before you move any steps forward with that certain financial advisor.

6. How do you get paid?

This is also important. There are some financial advisors who have certain payment structures that are a little bit unorthodox and may even be unethical. So it’s important that you understand if they’re going to have a fee-based payment structure, hourly wages, or a percentage of total assets under management.

You may find that you like a percentage of total assets under management because it’s more Performance Based. If that individual likes to have their success, then it is better to have somebody who is going to have more of their performance rewarded. And that might be the person that you want to be managing your money.

7. What is the median performance of your accounts?

This is one way to check if your financial advisor actually knows what they’re doing. If you can see what kind of results they’ve generated for their clients, then they will probably generate good results for you if they had done a good job with them.

Also, you want to be wary of long proposals. If their proposals are too long or unwieldy than it may be a diversion tactic. It’s possible that the financial advisor may be trying to dissuade you with a long proposal to make it more difficult for you to spot their strategies on how they might be deceiving you.

So it’s important to understand, “is this person creating a purposefully confusing structure to maybe pull the wool over my eyes?” So make sure you understand that.

8. What transformations has the investing landscape undergone throughout your career?

This is important because ultimately you want a financial advisor who understands and adapts to changes. There might be changes in fintech, Emerging Markets, new asset classes, risk-averse strategies, fee based pricing, or fiduciary duty and if they don’t really understand the changes that are occurring within the investment landscape, they may not be the right financial advisor for you.

It may be better to hold out and find somebody who’s more agile and able to adapt to change.

9. What kind of introductions could you provide me?

As mentioned at the beginning, it’s important to know because if this financial advisor can help you in more ways than just managing your money, that’s a huge plus. They can give you references to accountants, attorneys, and business introductions.

Ultimately, if you’re a client of theirs, they’re going to want to keep you around. So if you ask for a few intros and they know somebody that can help you, they’ll usually do it.

10. What portion of your own wealth do you invest in your strategies?

So this is a way for your financial advisors to put their money where their mouth is. If a financial advisor isn’t using their own investment strategies for themselves, then that should definitely be a red flag.

A lot of financial advisers don’t follow their own strategies and that is very hypocritical. So you want to find somebody who really really really knows their stuff and is willing to invest their own money into their own strategies.

Bonus questions

You may want to ask a few questions additionally, like, “are you a fiduciary?” Or, “do you consider a tax impact of your investment decisions?” Somebody who considers the tax impact of their investment decisions is usually a little bit more prudent with their money and aware of the full implications of their decisions. Though that is somebody who’s more responsible and may be a better fit for you.

This could be helpful if you’re a small business or if you’re investing into cryptocurrencies. There were some side effects of people who invested in cryptocurrencies who may not have understood that the tax impact of those investment decisions. Being a fiduciary is also an important question you could ask because it shows a certain type of ethical commitment that a financial advisor may have to an individual. So you want to make sure that these two questions could be asked as well to check if a financial advisor is right for you.

And that’s a wrap. We hope that you enjoyed this article on 10 questions to ask your financial advisor. Don’t forget to also check out our video “10 Questions to ask a Financial Advisor.”