7 Questions for New Advisors

How do you choose the right financial advisor for you? Here are seven questions you should ask a prospective advisor.

This decision crops up when you reach the point in your career that you need guidance to plan for retirement, save for your kids’ education or invest and grow your wealth. You should interview and evaluate several advisors to find a competent, qualified professional whom you feel comfortable with.

Here are the things to ask:

What is your educational background and what experience do you have? Find out what subjects the advisor studied and how long she has practiced. Ask her to briefly describe her work experience and how it relates to her current practice.

What are your qualifications? Advisors carry all sorts of professional designations such as Certified Financial Planner (CFP), Certified Public Accountant-Personal Financial Specialist (CPA-PFS), Charted Financial Analyst (CFA) and Chartered Financial Consultant (ChFC). Different associations give these titles. Most require the advisor to undergo specific training, pass tests and adhere to codes of conduct. Ask what steps your potential advisor takes to stay current with the financial field. If she holds a designation or certification, check her background with the relevant professional organizations.

What services do you offer? These depend on her credentials, licenses and areas of expertise. One cannot sell insurance or securities products, such as mutual funds or stocks, without the proper licenses, or give investment advice unless registered with state or national authorities.

How do I pay for your services and how much do you typically charge? As part of your agreement, the advisor should clearly tell you in writing how she is paid for the services she provides. The most common ways are fees based on an hourly rate, a flat rate or a percentage of your assets or net worth. While the amount you pay the advisor depends on your particular needs, she should give you an estimate of possible costs based on the work she performs.

Could anyone besides me benefit from your recommendations? Some business relationships or partnerships that the advisor has could affect her professional judgment while working with you, inhibiting her from acting in your best interest. Many hold themselves to a fiduciary standard, meaning that the advisor can only act in the client’s best interest. Others only follow a suitability standard, meaning that recommendations need only be suitable to the client.

Ask the advisor for a description of her conflicts of interest in writing. For example, advisors who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. They should be listed as potential beneficiaries from her recommendations. She may also have relationships or partnerships that she should disclose to you, such as business she receives for referring you to an insurance agent, accountant or attorney to implement of planning suggestions.

Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? Several government and professional regulatory organizations, such as the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), your state insurance and securities departments and professional organizations keep records on the disciplinary history of financial planners and advisors. Ask what organizations the planner is regulated by and contact these groups to conduct a background check.

All financial planners registered as investment advisers with the SEC or state securities agencies, or who are associated with a company registered as an investment advisor must provide clients with a disclosure form. AdviceIQ also vets advisors for past infractions. You can be sure that every writer on this site, as well as those in the list of certified advisors and your local rankings have pristine regulatory histories.

Can I have it in writing? Ask the advisor for a written agreement detailing the services you receive and all costs that you are responsible for in your relationship. Don’t just recycle it. Keep this document in your files for future reference.


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Michael Garry, CFP, is managing member of Yardley Wealth Management in Newtown, Pa. His website is http://www.yardleywealth.net/
AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty. For instance, the rankings this week measure the number of clients whose income is between $250,000 and $500,000 with that advisor. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.