What You Need to Ask Before Choosing a Financial Advisor

You have financial goals. Do you have the time, knowledge and confidence to achieve them without the benefit of a financial advisor? If not, do you know the questions to ask that will help you find an advisor who will best fulfill your needs?

Across the wealth levels surveyed by Millionaire Corner, there is an increase in those who are consulting with a financial advisor for a specific event, such as saving for college or planning for retirement. In a 2011 study of Millionaire households, for example, 34 percent--up from 30 percent in 2010-- described themselves as Event-Driven investors, meaning they consult with an advisor about a specific need, such as saving for college and planning for retirement.

Amongst married investors we surveyed in January, there was a high level of confidence that spouses were up to speed on the family’s finances (92 percent). The same percentage expressed confidence they could manage the finances in the event of a spouse’s passing. All said they could locate necessary financial documents. But do they know what to do with those documents?  

So; you want to find a financial advisor to help get your financial affairs in order, play devil’s advocate, handle investments, minimize tax liabilities, or any other of the myriad services they can provide. How to determine whether they are competent or whether he or she will be in sync with your investment philosophy?

Here are some interview questions that should give you a clear picture of whether a financial planner is right for you:

∙Experience: How long has an advisor been in practice? What are their qualifications? What professional certifications have they earned? What services do they offer?

∙Background: What education does the financial planner have? What professional certifications have they earned? In what areas (such as tax planning, retirement, investments) do they have proven experience? Are there any disciplinary actions on their record? There are several online resources to check on a financial planner’s background, including the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), CFP Board and Association for Investment Management (AIMR)

∙Service: How often you does the advisor contact his or her clients? How often will they meet with you? How often will they review your financial plan?

∙What is the advisor's investment philosophy?: Are they a strategic, or long-term planner, or a tactical (more active management) planner?

∙Do they have many clients who have a similar financial situation as you do?

’How is the advisor paid?:  Are they on a salary? Do they get paid fees or are they on commission, or a combination of both? Be wary of conflicts of interest and whether your advisor is working with your needs in mind.

∙How much do they charge?

∙Will you be working just with them, or are there other professionals with whom they consult? Get their names so you can check their backgrounds as well.

∙Tell me about yourself?: This could be one of the most important questions. You want to select a competent financial planner, but you also want to work with someone you can trust (honesty and trustworthiness were prized by 98 percent of Millionaires we surveyed). Establishing a personal connection is one way to begin to build that trust.