Six Important Questions to Ask a Financial Adviser

December 11, 2017
Amanda Carrozza

Amanda Carrozza is a freelance writer and editor in New Jersey.

Hiring a financial adviser should make your life easier, not more confusing. These six questions will help determine if a financial adviser is worth your business.

Part of hiring a financial planner is about trusting your gut. Does the individual seem honest? Knowledgeable? Financial planning is a far cry from what you learned in veterinary school, so doing your due diligence by researching and interviewing prospective advisers is necessary to ensure you’re working with someone who has your best interest in mind.

Whether you choose to ask a financial planner all six of these questions or you opt for a few that seem most important, don’t forget to gauge the responses you receive. Does the respondent fumble over explanations? Does he or she answer your questions directly? Remember, you’re hiring someone to simplify your finances, not make the process more complicated.

1. Are you a fiduciary?

The term “fiduciary” may be foreign to you, but it’s important to get a grasp of the phrase before you begin your search for the ideal financial planner. The answer to this question will tell you a lot about an adviser upfront.

A fiduciary is an individual who manages someone else’s assets. More than that, a fiduciary has a legal and ethical obligation to put the other party’s interests first. In terms of a financial adviser, being a fiduciary means the individual has pledged to act in a client’s best interests, even if it means reduced compensation.

This may seem like a no-brainer: financial advisers provide financial services, right? In reality, they offer an array of products and services. Some of the most common offerings include wealth management, investment management, sales and trading, financial risk and retirement savings.

You should never enter into a contract or agree to buy anything if you don't fully understand the costs. This is especially true for financial services. Any potential adviser you work with should be completely transparent about his or her fees and payments.

While no two financial plans will look exactly the same, it’s helpful to get an idea of what you’re likely to receive. Just as you conduct your business differently than the veterinarian a few towns away, financial advisers also have different ways of managing their plans. Some advisers might provide hundreds of pages in legalese that will make your head spin. Others provide bulleted lists, graphs and short paragraphs that are more easily digestible.

6. With whom will I be working?

Some financial advisers work completely one-on-one with their clients; others have a team approach. This could be entirely up to your preference. You may be the type of person who feels more comfortable knowing that only one individual will be working on your account, or you might not mind working with a few people in the same department. Either way, there are financial advisers and firms that will meet your needs.

Regardless of the structure, you should determine who the point of contact will be for any questions or concerns you have about your account. That person should be knowledgeable about your investments and able to respond to you promptly.

As a caveat to this question, you should also inquire about how frequently you’ll hear from your financial adviser or someone on the team. Financial advisers worth your business should have a set schedule for how often they’ll review your account (at a minimum, yearly) and provide feedback on current or potential investment opportunities.