Questions to ask a financial advisor

Introduction

Hiring the 'right' financial advisor is one of the most important decisions you can make when it comes to managing your hard-earned money, but choosing the 'right' financial advisor requires interviewing several. Most blogs you’ll read on this topic won’t tell you the hard-hitting questions to ask, but we will. After all, our mission is to help people like you make the most informed financial decisions, and part of that includes knowing what questions to ask any financial advisor before hiring them.

First, a financial advisor can help you create a solid plan for achieving your financial goals. We’ll help you ask the right questions to see if the advisor you’re meeting with can actually help you because not all financial advisors are capable of helping you.

These questions are designed to help you assess a financial advisor's qualifications, experience, investment philosophy, and approach to working with clients, and will help you understand what kind of relationship you’re getting into. 

How long have you been a financial advisor?

Understanding how long a financial advisor has been in the industry for is helping to gauge their expertise and track record. More experienced advisors may have encountered a broader range of scenarios and have been through events that shape the way they provide advice to their clients.

This is also a good question to ask to help you figure out if they recently just became a financial advisor, and then you can probe and ask them why.

How many times have you changed firms, and why have you changed firms?

This question sheds light on the advisor's stability and continuity in their career. More importantly, it helps you understand the incentives behind their moves. The goal of this question is to figure out if there was something that happened that triggered the advisor to move firms.

Note: if an advisor has moved several times over the last few years, it’s probably because they received a large payout to move, which is not inherently a bad thing, but it’s something to know.

What happens to your clients if you move firms?

This question is almost never shared in any online resources, but it’s extremely important to know the answer before working with any financial advisor. Ask this question in a very straightforward manner and make sure they explain the possible transition.

Typically, when an advisor moves firms, they legally won’t be able to tell their clients until they actually move. However, you’ll want to feel comfortable that they have a plan in place so you don’t get switched over to another advisor you don’t know.

How do you handle communication and client updates?

Everyone loves clarity and despises ambiguity, especially when it comes to money and relationships, and working with a financial advisor checks both of those boxes. You should expect clear and regular communication with any advisor you choose to work with.

However, financial advisors have different communication styles and cadences - some talk to their clients daily or weekly, while others wait to speak with them quarterly. You should know that the frequency of communication is impacted by the kind of friendship you have with a financial advisor and the specific situation you’re in, which may require more frequent phone calls and meetings.

At the end of the day, your communication expectations should be met by the financial advisor you choose.

How do you define a successful client relationship?

Defining a successful client relationship is integral to understanding how your financial advisor views their role and responsibilities, but it’s also unique to everyone. For me, success in a client relationship goes beyond mere financial gains; it's about fostering a partnership built on trust, transparency, and mutual respect. For you, it could be purely related to the financial gains.

We believe that a successful client relationship is one where both parties communicate openly, where the advisor listens attentively to the client's goals, concerns, and aspirations, and tailors their advice and strategies accordingly. It's about empowering clients with the knowledge and confidence to make informed decisions about their financial future, which is what we do at AdvisorFinder.

Ultimately, you have to be comfortable with their answer and make sure it aligns with your definition of a successful client-advisor relationship.

How do you get paid?

Understanding how your financial advisor is compensated is crucial for transparency and trust in your professional relationship. In fact, more people care about understanding how a financial advisor is paid compared to the fee the advisor is paid.

Advisors may receive compensation through various means, such as fees, commissions, or a combination of both. It's important to have clarity on this aspect to ensure they are being open and honest with you.

👉 here is a breakdown of financial advisor fees

What happens to your clients if you retire?

The average age of a financial advisor is about 56 years old, so this question is going to be expected, but rarely is it recommended. We believe you should absolutely ask this question because planning for the future includes considering potential scenarios like your advisor's retirement.

It's important to have clarity on what would happen to your financial affairs in such a situation. Typically, advisors have succession plans in place to ensure a smooth transition for their clients if they retire. This may involve passing on their client base to another advisor within the firm or arranging for a trusted colleague to take over their clients' accounts.

By asking this question, you have peace of mind knowing that there's a plan in place if and when your financial advisor retires.

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What’s your investment strategy and philosophy?

Understanding your financial advisor's investment strategy and philosophy is essential for ensuring alignment with your own financial goals, risks, and preferences.

Most financial advisors have an investment philosophy based on their firm's overall philosophy and resources. Then, they create an investment strategy unique to each client. If a financial advisor tells you that their investment strategy is the same for each client, that’s a red flag.

Ultimately, what you’re looking for in this question is an understanding of how customized their investment strategy will be to you and how they are coming up with that strategy.

Bonus question: ask your financial advisor what access they have to investment research and how they make investment decisions. Many financial advisors at large firms have dedicated investment teams behind the scenes, but smaller advisors typically do not.

What type of clients do you work best with?

The average age of a financial advisor is about 56 years old, so this question is going to be expected, but rarely is it recommended. We believe you should absolutely ask this question because planning for the future includes considering potential scenarios like your advisor's retirement.

Advisors may specialize in serving specific demographics or addressing particular financial needs. Knowing their preferred client profile helps determine whether they're the right fit for your unique circumstances and objectives.

We find that financial advisors are very clear in describing the type of clients they enjoy working with the most, so this is a question you need to ask them. Also, knowing the answer to this question will help you figure out if their description matches you or not. 
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Examples of clients that financial advisors could enjoy working with:

• People who work in tech and have complex equity compensation that requires a unique understanding of their industry
• Business owners who don’t have a lot of income during their growth years, but need advice on managing their personal and business finances
• Younger families with student loans to pay off and large purchases to plan for in the near future
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These clients all have very different situations, problems, wants, and needs. Make sure you ask this question.

What non-investment-related advice do you provide?

Asking this question has very little to do with understanding if they can help with insurance, tax planning, and estate planning. Rather, it’s about understanding what kind of emotional and financial-related advice the financial advisor can provide. Here are some examples:

Situation: A wealthy individual trying to figure out how much allowance or inheritance to give their children but is worried about giving them too much that they won’t be driven

• Why it’s important: Many financial advisors won’t have this kind of expertise unless they have clients who have been in a similar situation. So, it’s important to understand how an advisor can draw from past situations to provide advice.

Situation: A startup founder wanting recommendations on corporate attorneys to work with or wants their financial advisor to review their corporate documents for another set of eyes

• Why it’s important: You need to make sure your financial advisor is capable of helping you with this unique problem because many are not.

At the end of the day, the financial advisor you choose should be able to help you navigate the life you live. They’ll wear many different hats: financial advisor, therapist, negotiator, and more.

‍The value of choosing a financial advisor extends far beyond the investment returns they can provide.