Choosing a Financial Advisor: 7 Critical Questions to Ask and What to Look For


Choosing a financial advisor is a huge decision. It's like finding a partner for your money, and you want to be sure you're with someone you can trust. The right advisor can help you achieve your financial goals, but the wrong one can be costly.

So, how do you know if you've found a good one?

It all starts with asking the right questions to ask a financial advisor. This blog post will give you a list of critical questions to ask, explain what to look for, and help you understand the different types of advisors and their financial advisor fees.

1. Fiduciary vs. Suitability: A Fiduciary Always Works in Your Best Interest

This is the most important question you can ask.

  • "Are you a fiduciary?"

A fiduciary vs. suitability standard is a crucial distinction. A fiduciary is legally and ethically obligated to act in your best interest. An advisor who follows the "suitability" standard only has to recommend products that are "suitable" for you, but they might not be the best or most cost-effective option.

Look for: An advisor who can confidently answer "Yes" to this question and who can provide a written fiduciary oath.

2. Understanding Financial Advisor Fees and Compensation

Nobody likes hidden fees. You need to know exactly how your advisor gets paid.

  • "How are you compensated?"

  • "Are you a fee-only or a fee-based advisor?"

This is the difference between a fee-only vs. fee-based financial advisor. A fee-only advisor is paid directly by you, usually as a percentage of assets under management (AUM) or a flat fee. A fee-based advisor earns fees from you and also commissions from selling financial products.

Look for: A clear, transparent answer. A fee-only advisor's compensation structure eliminates conflicts of interest, making them a popular choice.

3. Qualifications and Credentials: What's Behind the Name?

Anyone can call themselves a financial advisor. But only a few have the credentials to back it up.

  • "What are your qualifications and professional certifications?"

This is where the alphabet soup of credentials comes in. A CFP vs. CFA is a common point of confusion. A CFP (Certified Financial Planner) focuses on comprehensive financial planning for individuals, while a CFA (Chartered Financial Analyst) focuses more on investment analysis. A CFP designation is often considered the gold standard for personal finance.

Look for: Someone with a CFP® (Certified Financial Planner) designation. This shows they have met rigorous educational and ethical standards.

4. The Advisor's Investment Philosophy: How Will My Money Be Managed?

You need to be on the same page about how your money is invested.

  • "What is your investment philosophy?"

  • "How will you manage my money?"

An advisor's philosophy can range from active to passive management. A good advisor will be able to explain their approach in a way you can understand. This question also helps you differentiate between a robo-advisor vs. human financial advisor. A human advisor can offer a more customized and hands-on approach.

Look for: An advisor whose philosophy aligns with your risk tolerance and long-term goals.

5. Client Base and Specialization: Do They Work with People Like Me?

Not all advisors are right for all people.

  • "What is your typical client like?"

  • "Do you have a specialty?"

This is a specific question about financial advisor's client base. An advisor who specializes in working with business owners or retirees may not be the best fit for a young professional.

Look for: An advisor who has experience with clients in a similar financial situation or life stage as you.

6. Services Offered: Are They a Good Fit for My Needs?

Do you need help with retirement planning, taxes, estate planning, or all of the above?

  • "What specific services do you offer?"

  • "What is included in the fee?"

This helps you understand the scope of their work. Some advisors offer a broad range of services, while others are more specialized.

Look for: An advisor who can meet your specific needs and who is transparent about what services are covered by their fees.

7. The Final Vetting: What Are the Red Flags?

Before you sign on the dotted line, trust your gut. Red flags when choosing a financial advisor can include:

  • Pushing products that seem too good to be true.

  • Guaranteeing investment returns.

  • Having a criminal or disciplinary record (you can check with FINRA's BrokerCheck).

  • Being vague about their fees or compensation.

By asking these questions to ask a financial planner and looking for the answers we've outlined, you'll be well on your way to finding a good financial advisor who can help you achieve your goals.

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