What to Ask a Potential Advisor

Finding a financial advisor is one of the most important decisions you will ever make.  Financial advisors are responsible for protecting and ensuring your financial future.  Therefore, it is critical to work with an advisor that is competent in your areas of need.


Discussing Your Financial Goals


When meeting with a financial advisor for the first time, it is important to discuss your financial goals.  It is important to have an open dialogue with your advisor, and to communicate regularly.  The relationship between an investor and a financial advisor is like a marriage, because they are both maintained through communication.

Prior to hiring a potential advisor it is highly important to get to know them, and allow them to get to know you.  It is of the utmost importance that you communicate your financial and life goals with your potential advisor.  You and your advisor should enter into a relationship fully aware of what you want for your financial future.  Moreover, sharing a common understanding and respect for one another is the key to a sustainable and successful relationship.


How to Handle Meeting an Advisor for the 1st Time


Meeting with an advisor for the first time can make some people anxious.  Some people do not handle meeting with new people well, and are uncomfortable with confrontation.  However, it is important to ask a potential advisor questions prior to hiring them.  Investors should prepare a list of questions ahead of time in order to help guide them throughout their meeting.


For investors that are unsure of what to ask a potential advisor here are a list of sample questions:


1. Do you believe that you can help me achieve my financial goals?

It is important to get a feeling of whether or not an advisor is truly confident in his or her skill set.  Not all financial advisors are created equal.  Financial advisors specialize in various aspects of finance including:  retirement planning, estate planning, tax planning, college planning, insurance planning, etc.  It is important to discuss with your potential advisor whether or not they are competent in your area of need.  If an advisor does not have the skill set to help you achieve your financial goals, then you do not have the right fit.  You should only work with an advisor that you believe is competent, and who truly believes that they can help you attain your financial goals.

2. How do you plan on helping me reach my financial goals?

Financial advisors have a unique role in shaping your financial future.  Advisors act as a financial coach.  They are responsible for developing and implementing a game plan that will help you to achieve your financial goals.  An advisor will probably not be able to create a full-proof plan immediately after meeting you.  However, the right advisor should be able to create a general game plan that is reflective of your financial goals.  After some time has passed and they really get to know you, then they will be able to develop and implement a plan to help you reach your goals.

3. What is your investment philosophy?

Ask your advisor to describe his or her investment approach. Many advisors cater their investment strategies to each of their clients.  It is important to understand how an advisor will approach investors that share a similar financial situation.  Asking this question will allow you get a better understanding of how your advisor will build your portfolio to help reach your financial goals.

Additionally, make sure that you understand everything that an advisor is telling you.  Some advisors speak in complex terms and use financial jargon that can be difficult to understand.  Ask your advisor to explain their philosophy in basic terms.  If you are confused at any time throughout your conversation then politely ask them to rephrase what he or she has said in simpler terms.

 4. What are your credentials? (Education, designation(s), and years in the field)

It is important to assess if the prospective advisor you’re interviewing is experienced and knowledgeable in your area of need.  Asking about an advisor’s credentials is a great way of assessing their core competencies.  Be sure to ask about their education, designations (There are many different designations for various specialties such as:  CFP, CPA, ChFC, CLU, etc.), licenses (There are many different licenses that advisors must have to sell certain products such as:  Series 7, 63, 65, 66, etc.), and years of experience.

5.What kind of clients do you typically work with?

Asking about the type of clients that an advisor typically works with will allow you to better understand and advisor’s specialties.  Some advisors typically work with young families that are concerned with college planning.  On the other hand, some advisors typically work with older couples that require estate planning.  Understanding the type of clients that an advisor typically works with will enable you to assess their credentials and level of expertise.

In addition, many advisors carry designations that they may not use on a regular basis.  Understanding an advisor’s typical client will allow you to identify if the advisor specializes in your area of need.  Additionally, you will be able to better assess whether or not an advisor will give you personalized service.

6. What is the size of your typical client’s portfolio?

Some advisors have a client minimum.  This is the minimum portfolio size that an investor can have in order to work with an advisor.  Other advisors do not require a minimum portfolio size.  This means that they may have clients with rather large portfolios, and those with small portfolios.  It is important to know an advisor’s typical portfolio size, because it helps to estimate how much attention an advisor will give you.  If your portfolio size is above the advisor’s typical client portfolio then he or she will likely give you a lot of attention.  Conversely, if your portfolio falls below his or her average portfolio size then there is the possibility that you may not receive the same level of attention as other clients.

7. What hours are you available?

Much like doctors, lawyers, and other professionals, financial advisors tend to work on a flexible schedule.  For the most part, financial advisors work normal work hours.  However, many advisors may be available at other hours for their clients.  Some advisors offer service on weekends, while others may offer night time hours.  It is important to assess your own needs prior to asking an advisor this question.  Ask yourself, “What time do I want to meet with my advisor?”  Then, ask your prospective advisor if they offer the hours that works best for you.

8. How do you communicate with your clients?

Communication may be the most important criterion of the investor and advisor relationship.  Proper communication is the key to a successful relationship that can last through many market cycles.  It is important to work with an advisor that talks to you, not through you.  Ask your prospective advisor, “How do you communicate?   When do you communicate?  Finally, how often do you communicate?”  The answers to these questions will allow you to judge how freely you can communicate with the advisor.

9. How are you compensated for your services?

Advisors are compensated for their services in a variety of different ways.  Be sure to ask how your advisor prefers to be compensated of his or her services prior to hiring them.  The three types of compensation are fee only, commission only, and fee and commission.  Many advisors offer select services to investors based upon the payment method that they choose.

10. What happens to me if something happens to you?

This is an important question that many investors fail to ask.  If an advisor were to become ill or pass away it is important to know who would take over your portfolio.  This is known as succession planning.  It is the responsibility of an advisor to plan for unforeseen circumstances and have a succession plan in place.  However, it is the responsibility of investors to ask if the advisor has a plan in place.  Many advisors have agreements in place with their company for an advisor or another representative to take over their accounts if they were to become ill or pass away.  In addition, many advisors with small practices have agreements with fellow advisors in the industry that they trust to take over their accounts.  Nevertheless, you should do your due diligence as an investor and ask an advisor about his or her succession plan.  Also, if they plan on having another advisor take over his or her accounts then you should ask to meet them.


How Can Right Financial Advisor Help


At Right Financial Advisor we understand that meeting an advisor for the first time can be nerve wracking.  However, our matching program uses a scientific algorithm that matches you to your right financial advisor.  Our matching program is designed to match you to an advisor that is not only qualified and competent in your area of need, but also someone that you can connect with on a personal level.  Meeting an advisor for the first time doesn’t have to be stressful.  Find your right financial advisor today, and use these ten questions to help you connect with the right advisor for you.


Right Financial Advisor’s Nick Bredow, contributed this report.


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