5 Questions to Ask When Choosing a Financial Advisor

Selecting a financial services advisor can be a daunting task.  Individuals have the temptation of narrowing their decision making based on one aspect of investing – investment performance trends.  However, performance ebbs and flows based on market conditions and geopolitical issues.  Performance can be stellar in one year and struggling the next.  While a firm’s ability to generate returns is a critical component of wealth management, it’s the long-term view that demonstrates true results over short-term performance wins.  Besides investment performance trends, there are five key questions an investor should consider when hiring an advisor to manage assets.

1. What is the firm’s fee structure?

There are three standard compensation structures that businesses use to receive compensation for their services.  The first is a pure commission approach.  The sales person receives only commissions for the services and products you purchase.  The second structure is known as Fee-Based compensation.  The advisor has the ability to offer some products and services on a commission base while offering other services as a flat fee or a percentage of assets under management.  The advisor has the ability to position the entire service and product package in a way that the advisor can gain the most from both fee structures while offering suitable options for a client rather than best fit solutions. The last fee structure approach is designated as FEE-ONLY.  When you connect with a firm that holds this designation you can be assured that they do not take commissions, receive back-end benefits for services sold, and they do not feel the temptation of putting their financial need above yours.  FEE-ONLY advisory firms take on the fiduciary responsibility of putting your needs first, always.

2. What licenses, credentials, or other certifications do the advisors hold?

If you are looking for someone who is savvy in financial planning and provides a holistic solution to your financial goals, then you should seek out advisors who hold the Certified Financial Planner® (CFP®) designation. When you have assets that you wish to invest, and you desire to hire an investment advisor, the credentials you should seek are two-fold.  The firm should be a registered investment advisor (RIA) who hires analysts that hold the Chartered Financial Analyst (CFA) certification. For individuals who are small business owners or have high tax issues, you will want to find an advisory firm that also provides Certified Public Accountant (CPA) services.  This professional can support advance tax planning needs and tax preparation services.

3. What services does the firm provide?

This is a critical component to your selection process. Some firms provide only planning services, while others focus primarily on investment management. When selecting an advisor, you want him or her to be backed by a firm that can meet your changing needs throughout your life. They should also have services that can cross-over and work together in order to produce a comprehensive wealth management approach. When selecting an advisor, ensure that you are picking a firm that can meet your needs today, as well as walk with you through each life stage.

4. How do they communicate with existing clients?

If you are looking for a firm that will keep you informed and up-to-date, then you will need to ask several questions about how the firm on-boards new clients, how often they meet with their clients, and how accessible the advisors are to incoming call and client requests.  Some firms focus more on the numbers than the individual, while others focus their resources toward maintaining client relationships and anticipating client needs.  Make sure you select a firm that best matches your disposition.

5. How long have they been serving clients and what is their long-term plan?

You should be cautious when selecting a one-man shop or a firm that does not yet have a proven track record of business success. While there are plenty of good start-up organizations out there, when it comes to financial management, expertise, industry experience, and proven success will trump these smaller entities. Unless you are a beginning investor at the front end of growing assets, you will be better served by a team of experts in a firm that has proven to succeed in both good and challenging economic conditions.

These five questions can spark further conversations with the advisors you are interviewing.  At the end of the day you will want an advisor that understands your lifestyle, your family dynamics, and supports your long-term goals. As you interview potential firms, you will quickly gain a sense for how well you connect with them and how they relate to your financial story.  Once the connection is made, however, competency, integrity, and longevity should drive your selection process.  Happy interviewing!


1.    http://guides.wsj.com/personal-finance/managing-your-money/how-to-choose-a-financial-planner/

2.    https://www.forbes.com/sites/rogerma/2017/01/04/5-things-to-look-for-when-picking-a-financial-advisor/#7d6507ad1fc4

3.    http://www.kiplinger.com/article/credit/T064-C000-S001-how-to-pick-a-financial-planner.html



*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.