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HomeFinanceHow To Interview A Financial Advisor: A Proven Script

How To Interview A Financial Advisor: A Proven Script



Your money has finally become too much for you. Your sick of budgeting (or you just can’t stick to one), but that doesn’t mean you don’t need a financial plan.

Lucky for you, there are people that actually like handling money.

Financial advisors are there to help you make a plan for your hard-earned cash, but it’s still your job to make sure they’re the right match for you. You’ll need to ask the right questions when you first meet so you can ensure your long working relationship will be a positive one.

1. What is your background?

An excellent way to start any conversation is by asking someone to tell you about themselves. When you’re speaking to your advisor, it’s good to know them on a personal basis. However, you’re really looking for information on their background as an advisor.

Ask them some follow-up questions like:

  1. What made them want to become an advisor?
  2. How long have they been an advisor?

2. What qualifications and certifications do you have to help advise me?

You should never take financial advice without knowing where it’s coming from. The term “financial advisor” isn’t regulated. It’s crucial you aren’t getting a financial plan from an insurance salesperson looking only to sell you a whole life insurance policy.

Ask the advisor what qualifications they have to advise you. They may mention their college education, certifications they’ve earned, as well as licenses they hold to properly advise you and sell you investments.

Read more: What Is A Financial Plan And Why Do You Need One?

3. How do you view your investment philosophy?

Advisors have different beliefs on how to invest your money to earn a return. Some advisors prefer to have their clients invest in low-cost index funds, a strategy that has proven very successful.

Read more: How To Invest In Index Funds: A Beginners Guide

Others claim to try to beat the market by picking individual stocks.

It’s essential to select an advisor with an investment philosophy you believe in.

Be careful, though. Never work with an advisor that presents an investment philosophy that guarantees returns or that claims they have a track record of beating the markets over the long term. Returns are rarely ever guaranteed, except for a few financial products. Reliably beating the stock market is an extremely difficult feat, as well.

4. How do you determine what you recommend for me to invest in?

Advisors should help you build a somewhat custom approach to investing your assets in order to grow your wealth. That said, several clients may have similar goals so chances are you’ll be one of many using the samestrategy to invest. 

The key is making sure the advisor isn’t going to automatically lump you into a bucket and force you to follow that strategy exactly. Make sure the advisor is willing to offer flexibility in your approach. 

For instance, an advisor may propose an 80% stocks/20% bonds mix, but you may feel more comfortable if you add a small portion of alternative assets to your strategy. An advisor should be able to explain how this would impact you and make the change, if you wish.

5. How will our interactions work?

Setting expectations for a relationship early on helps make sure both people are happy.

You should ask your potential advisor the following:

  1. How often do they meet with their clients?
  2. How do those meetings take place?
  3. What is discussed and how long are they?
  4. What happens if you have questions between sessions?

Understanding these basic scenarios and how they’ll work out upfront can make sure the advisor can accommodate your needs and that you’ll be happy with their response. 

6. What services do you provide?

Financial advisors can offer a wide variety of services. Depending on where you are in your financial journey, you may only need a couple of them. If you’re further along in your financial life, you may need access to more services than an advisor offers.

Make sure you know exactly what you’re getting by asking the following questions:

  1. Are you simply paying for investment management?
  2. Or are you also getting access to a comprehensive financial plan and tax planning advice?

7. Are you a fiduciary?

A fiduciary is someone legally required to make decisions in the best interests of their clients. Not all financial advisors are fiduciaries. Ideally, yours will be.

Non-fiduciary advisors may recommend investments and products that are simply suitable

The difference between an investment in your best interest and a suitable investment could add up to a significant amount of money over time.

Typically, suitable investments have higher costs or may pay advisors commissions for selling them. In these cases, the advisor may profit more but you may end up with less money in the long run.

Read more: What The Fiduciary Rule Is And Why You Should Care

8. Are you a fiduciary 100% of the time?

Just because an advisor is a fiduciary doesn’t mean they’re a fiduciary 100% of the time. Therefore, it’s essential to understand when your advisor is and isn’t a fiduciary. 

They may be a fiduciary when they sell you investments, but they may not be a fiduciary when selling commissioned life insurance products. Again, ideally, they’ll be a fiduciary 100% of the time.

9. How do I pay you for your services and do you receive money from other companies?

Financial advisors can get compensated in different ways. Some earn commissions from selling you life insurance products and mutual funds with load fees. These arrangements are less than ideal, but allow advisors to work with investors without a large number of investable assets.

Other advisors may charge for their time on a per-project, annual, or hourly basis. These are called flat-fee advisors. Plus, some advisors may charge you an “assets under management” fee. This is typically a percentage of the assets they manage for you, such as 1%.

Understanding how an advisor is compensated and how much they make from your account can help you figure out if the cost is worth the advice. It also enables you to assess if any potential conflicts of interest exist.

10. Are there any other costs I have to pay?

You must understand if there are any other costs you have to pay when working with an advisor. If they outsource your taxes to a CPA firm, you may have to pay that CPA firm to prepare your return. The advisor’s custodian may charge you a fee for paper statements rather than digital emailed statements.

Asking this question makes sure you know all potential fees you may have to pay before signing up to work with an advisor.

11. Who holds my assets?

The advisor should let you know they use a custodian – a firm that physically holds your money and assets – and the custodian’s name.

Look up the custodian to make sure they’re a legitimate company and check to see if they have any complaints filed against them after you’re done meeting with the advisor.

12. What are your goals as an advisor?

Some advisors love helping people with their money and will keep managing funds until they can no longer work. Others view the industry as a business, which it is. These advisors may build their firm to a certain size then sell their business to another advisor to retire.

Since working with an advisor is a long-term relationship, you need to know the advisor’s plans. Will they retire before you do, leaving you looking for a new advisor? Or will they be around long enough to help see your long-term financial goals through to the end? 

13. What happens when you retire, sell your firm, or are temporarily unavailable?

Advisors may not always be available. They may retire, sell their firm, or even be temporarily unavailable while on vacation.

Ask your potential advisor how they plan to handle these situations so you can make sure you’re comfortable with the answers before you start investing with them.

Don’t quit interviewing after you hire

You may feel that once you’ve interviewed and hired an advisor that your job is done. Sadly, that’s not the case. 

Continue reevaluating the relationship

Some advisors may perform well in an interview, but do not perform up to your expectations once you hire them. It’s easy to say things to sell a potential client, but sometimes it’s more challenging to deliver on those promises.

Continue monitoring and reevaluating the relationship to make sure the advisor lives up to what they said and your standards for the entirety of the relationship.

Make adjustments as necessary

If the advisor doesn’t live up to your standards, don’t immediately ditch them if it isn’t a serious issue. Communicate with your advisor and see if the situation can be fixed as long as the problem isn’t severe, such as missing funds or flat-out lying to you.

The advisor may not address your issues in a way you find acceptable. In that case, it’s time to find a new advisor and move your money.

Finding a financial advisor

You can find potential advisors to interview in several ways:

  1. Search databases, such as the Paladin Registry. 
  2. Google financial advisors. 
  3. Ask trusted friends for referrals.
  4. Respond to advertisements advisors send out.
  5. Check with the brokerages and banking institutions you already do business with.

Look into their background even before the interview

When searching for an advisor, it’s essential to look into their background before interviewing them. 

First, verify any credentials the advisor says they have. If they say they’re a Certified Financial Planner (CFP), look them up on the CFP’s website to make sure they’re still actively a CFP.

You also want to check to see if brokers have any adverse actions against them. You can do this by searching the broker’s name on BrokerCheck. This is a website run by FINRA, which is the organization that regulates member brokerage firms. 

As long as an advisor’s background checks out and they don’t have any significant red flags, you can request an interview to move to the next part of the advisor selection process.

Summary

Interviewing a financial advisor isn’t difficult if you know what questions to ask and what to look for. Use the list of questions above to get the conversation started. 

If new questions pop up as you interview your advisor, ask them. Once you’ve finished interviewing at least a couple of advisors, choose the one that’s the best fit for your situation and start building your financial plan and wealth with them.

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