16 Vital Questions to Ask a Financial Advisor When Planning for the Future

Trusting someone to help you plan your future is a big decision, and it’s important to understand the right questions to ask a financial advisor to make sure it’s the right decision for you.

There’s so many factors to asking the right questions of your potential financial advisor, and contributor Andy Shuler does a great job of covering many of those in this post. Hopefully it will dispel some of the confusion around hiring a financial advisor and what it can entail.

questions to ask a financial advisor

Unfortunately, in my time actively listening, reading and experiencing the various financial community podcasts, blogs and forums, it really seems like having a financial advisor is almost deemed as a bad thing. 

It’s almost an assumption that all financial advisors are evil and only looking after themselves, and that if you need one, then you’re viewed as being unintelligent or beneath others.  I’m not going to lie – it absolutely disgusts me, for a few different reasons:

  • Not all financial advisors are out there, looking to pull a quick one over on you to benefit themselves only
  • Hiring a financial advisor doesn’t mean you’re dumb.  If anything, it means the exact opposite.  Most likely, you’ve hired them for one of three reasons:
    1. You don’t have the time to manage your finances
      • For me, personally, I can’t even fathom this.  But to be fair, that’s simply my ignorance.  There absolutely are people out there that have too much else going on to do this.  And quite possibly, they might make more money spending their time doing other things, or just think there’s greater value doing other things.
    2. You’re not confident in your financial understanding and wherewithal
      • Can you think of literally any other time where hiring someone to help you out, in an area where you might lack awareness, is considered a bad thing?  Me neither, but sometimes people give it that bad rap.
    3. You are confident in your knowledge, but you want to bounce your ideas off someone and trust their expertise as it is, you know, their job.
      • This is 100% respectable.  Why would you not want to trust a professional to have your best interest in mind and to help you reach your goals?

In my opinion, I think a lot of the bad rap in the finance community regarding financial advisors might come from people that have heard of others that bad experiences or maybe they’ve even worked in that environment. 

That’s great, and it’s ok to be skeptical, but I am here to say that not all financial advisors are out to get you.  However, some are.  Some will try to take advantage and pull one over on you.  Some financial advisors ONLY have their best interest in mind and will feed you lies so that they can collect that big commission check. 

So, what can you do? 

First of all, take the time to learn about financial independence, investing, saving, budgeting, and all of the other catchy terms and methodologies on your own. 

Your situation will not get worse by you trying to take the bull by the horns and learn on your own. 

Worst case, you’re more knowledgeable when you hire a financial advisor and can assist, challenge, and brainstorm with your advisor.  Best case, you find out that you don’t even need one. 

But for the sake of this post, let’s assume that you still think you want an advisor. 

The 16 Questions You Should Ask a Financial Advisor Before Hiring One

So now that you’ve decided that you want to hire a financial advisor, maybe you fall into one of the three categories above.  Maybe there’s a completely different reason that you want an advisor. 

What is the best path forward?  You’ve found someone to speak with and have a meeting setup – let me guide you through a questionnaire to interview your advisor and make sure that they’re a fit for you:

1. How and when do you get paid?

If you’re being charged a commission, that is an immediate red flag.  Commission is something that is offered to incentivize a sale, not incentivize the well being of the individual. 

If you had the option to make $5,000 by selling the customer a GREAT product or $10,000 selling the customer a good product, which would you choose?  I bet 99% of you are saying you would sell them the great product.  Well, I think you’re all liars.  But unfortunately for you, it doesn’t matter what you would pick – it’s what the advisor would pick, and I would rather have the great product, and for that reason, focus on an advisor with fee-based costs.

If you had the option to make $5,000 by selling the customer a GREAT product or $10,000 selling the customer a good product, which would you choose?  I bet 99% of you are saying you would sell them the great product.  Well, I think you’re all liars. 

But unfortunately for you, it doesn’t matter what you would pick – it’s what the advisor would pick, and I would rather have the great product, and for that reason, focus on an advisor with fee-based costs.

2. What are my costs?

This is so incredibly important.  You need to understand exactly what you’re paying and why you’re paying it.  Is it a flat fee?  Is it a subscription?  Is it performance based? 

A very clear outline of your costs needs to be a focal point.  PS – free…yeah, that’s not a good thing.  Nobody works for free.  If they say that they are working for free, they’re probably not.  Another red flag in my eyes.

3. Are you a fiduciary?

Fiduciary is defined as “involving trust, especially with regard to the relationship between a trustee and a beneficiary.”  Does that sound like something you would want?  I know it’s what I would want. 

A fiduciary is required to do what they believe is in the best interest of the client.  An advisor that isn’t’ a fiduciary, well, isn’t required to do so.  IN other words, they can push a product or service that gets them a higher commission even if they know it won’t perform as well.

4. What services do you provide?

Do they offer investment management, financial planning, personal finance, etc.?  EXACTLY what is being offered to you?  You might not need, or want, all of this advice – but you’re likely paying for it.  Take the time to find someone offering exactly what you need.

5. Do I fit in with your current clientele?

Who cares, right?  WRONG.  Ideally, you will match the characteristics of your potential advisors’ current clientele.  Why, you ask?  Well – it’s simple really. 

Your potential advisor is already familiar with what you’re looking for.  It’s not uncharted territory for them

You have multiple case studies of how this advisor’s recommendations have performed.  Just ask for some references.

6. What is your approach?

This is very important and goes along with the current clientele question.  Your advisor should align with your best interests.  Do not get this confused with them having to agree with all of your desires, though. 

You hired them for a reason – their expertise. 

Be free to give suggestions, and challenge their thoughts, but listen to what they say.  You hired them.  It’s their career.  If you did your homework on the front end when hiring them, then you should trust them to have your best interest in mind. 

Personally, I am at the age that I want to be as aggressive as humanly possible and invested 100% in stocks (I’d be 110% if I could be), but if I hired an investor that I really, really trusted and they had a legit case for me to not be invested this heavily in stocks, I would trust them.  If I didn’t, then why did I hire them?  Again, not saying that the advisor should always get the final say, but listen to their experience.

7. What is your experience?

Speaking of experience, what is their experience?  Have they ever experienced a recession?  Are they fresh out of school?  Are they middle-aged but new to the industry?  What makes them a better advisor than yourself?

8. How does our relationship work? 

Will I be working with you only or with a team? Is it constant, open communication?  Will we have annual meetings? Quarterly?  All of these types of questions need to be addressed prior to signing an advisor.

9. How will you measure success?

If you measure success by beating the market and your advisor measures success by minimizing risk then, well, your “win-win” territory is when the market is going down, but your portfolio isn’t going down as rapidly.  I’m not sure about you, but when I think of “win-win”, I don’t necessarily think of this as being the ideal situation.  Yes, losing less money is obviously a good thing, and I personally take a lot of pride in it, but if that’s not your expectation of success, then it might not be the right match for you.

10. What are reasonable expectations for me?

This also goes hand in hand with measuring success.  You need to know what can be expected.  If you do not understand the goals of your advisor, then is it really fair to be upset if your goals aren’t met?  Your goals need to be aligned and your expectations need to be in sync with one another.

11. Why should I choose you over another financial advisor?

Let the advisor tell you why they’re better.  Why are they worth that fee?  What can they provide you?  After all, you’re the one with the money and they’re the one interviewing for the opportunity to provide you a service.

12. What licenses, credentials or certifications do you have?

Is your potential advisor qualified?  Do they have any certifications or degrees that will give them a leg up when managing your money?  I certainly hope so.  I don’t want someone that used to work at GameStop that took a weekend class to be my new financial advisor.  I need to be shown that they’ve spent some time learning about ways to help me be successful.

13. Can I see a sample financial plan?

This should be an easy give!  They should LOVE this question.  It’s their chance to tout what they do and show you how they can provide value.  If they’re not willing to offer this up….major red flag.

14. How have your clients’ portfolios typically performed?

This question goes hand in hand with expectations.  Past results predict future behavior.  Take a look at some of their client’s portfolios in bull markets and bear markets.  What about looking at different ages?  Do you see the advisor with a “one size fits all” type of approach or does it seem to ‘flex’ a bit based on the client? 

15. How many clients do you serve?

Not only will this give you a look at how respectable the advisor is, but it will tell you how much time they might have for you without directly asking it.  Do you want someone that is constantly busy, but they manage a ton of accounts, so you trust their judgment and history?  Or, do you want someone that’s more hands on and doesn’t have as many accounts and can give you that personal touch?

16. What has been your biggest mistake that you’ve made since being a financial investor?

“What is your biggest weakness?”  Have you ever had that question in an interview?  Oh, only about 100% of the time?

Yes, I want to hear about how the advisor learned from their mistake…but I REALLY want to hear about how bad the mistake was.  I want to see if they’re being honest or if they’re trying to be clever and show that their biggest mistake was actually a positive, like, “I drove a customer away because I bothered them too much about making sure I was meeting their needs.”  Bogus. 

I want to hear them say “I was too risky and lost my customer 30% when the market was down 12% and by the time it rebounded, the trust and credibility was gone.  That shows me honesty.  That gives them credibility in my book because they’re willing to be truthful.  If I am ok with that potential outcome, for the risk of the inverse of gaining 30% when the market is up 12%, then maybe that’s a “biggest mistake” that I can handle.

All in all, financial advisors can be a great asset if you take the time to do the homework on the front end.  I really advise (ha….) you to consider it if you think that it’s something that you need. 

I highly encourage that you don’t immediately dive into this.  Try to learn on your own and see what you can take care of on your own.  I think it’s incredibly important and rewarding to be 100% in charge of your own financials if you feel like you have the tools to do so. 

If you don’t, look around – there’s a ton of blogs and podcasts to take advantage of, such as this one that you are reading.  It’s truly what got me into investing and helping set up myself and my family for retirement, even though we have a long time until we get to that point.

I know that I included a lot of questions to ask a financial advisor, and maybe it seems overwhelming, so I’ve narrowed it down (below) to the questions that I think are the most important. 

Best Questions to Ask a Financial Advisor

the best questions to ask a financial advisor (ranked)

As you can see, my winning question was if the advisor is a fiduciary, and it’s really pretty simple.  If the advisor is a fiduciary, and they truly have your best interests at heart, then I think that’s the number one hurdle to overcome.  Chances are they have the training and the experience, and can adapt to your desired philosophy, and can adjust how often they work with you.  All of the questions are very important, but to me, this is the “golden rule” of hiring a financial advisor.

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