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5 Questions You Must Ask Any Financial Planner Before You Consider Working With Them 

Simone Johnson  |  August 6, 2019

Good news: Finding a financial advisor is far less complex than finding the perfect mate. If you’re shopping for your future financial expert, here’s how to make sure they’re really the one. 

So, you’ve decided to hire a financial advisor. Amazing! Ideally, this is a relationship you want to keep for the long term — maybe even a lifetime. That means there’s nothing wrong with being (more than) a little picky and spending time asking questions to make sure you’re getting exactly what and who you want. 

According to a CFP Board’s 2015 survey, 28% of Americans used a financial advisor in 2010. But that number increased in four years ago, as 40% said they sought professional financial help. That said, this the person you’re trusting with your money.  (And we know how hard you work for that.) Taking the first person who walks through the door isn’t going to cut it. Instead, create a shortlist of prospects by gathering recommendations from colleagues and friends (or if those are in short supply use the search tools at NAPFA.org, GarrettPlanningNetwork.com, and PlannerSearch.org). Set up in-person meetings with each one (this should always be free). And ask the following questions: 

Question 1: Are you a fiduciary? 

Some advisors and brokers can offer investment advice that isn’t always in their client’s best interest, explains personal finance expert Lynnette Khalfani-Cox, CEO of The Money Coach, and author of Zero Debt. They can recommend an investment that pays them a higher-than-necessary commission or fee, even when there is a comparable investment option that would cost their client less. This is why you must seek out an advisor who abides by something called a “fiduciary standard,” which mandates that they always put their client’s interest before their own. That way there are never conflicts of interest when it comes to the advice you’re getting. Any planner who is a member of the Garrett Planning Network, the National Association of Personal Financial Advisors or has the CFP (Certified Financial Planner) designation, will be bound to abide by the fiduciary standard. 

Note: You can and should also check up on a prospective advisor with the CFP Board or by using the broker check tool from FINRA, says Carina Diamond, a certified financial planner in Akron, Ohio, and a CFP Board Ambassador. These governing bodies keep a disciplinary record of their financial planners and advisors. You can also go on CFPBoard.net to see if your advisor has been verified (or even disciplined) by the CFP Board by typing in their name, company and where they practice. If this feels a little extreme, think about it this way — would you go to a restaurant without looking up reviews online first? This is so much more important than that! 

Question 2: How do you get paid? 

Paying your advisor is not as simple as paying your barista. They can be compensated in four ways. Some advisors are paid by the hour or on a monthly basis. Some charge a flat fee — a set payment based on the specific services they’re performing, like developing a plan.  Other advisors charge you a percentage of your assets under management — in other words, you pay them a percentage of the total assets in your account. The industry average fee is around 1%, but can be more or less depending on how much you give them to manage. Finally, there are some advisors who still rely on the old brokerage model where they earn a commission on the investments you buy. The unfortunate rub is that they may be inclined to try to push you toward the investments with the highest expenses baked in, even when lower-priced ones are available, Cox says. It’s up to you to keep your eye on this ball. 

Complicating matters, some advisors may even have a hybrid of these compensation options. So don’t let different payment methods stop you from comparing rates. It’s important to keep in mind how much everything will cost in the end, on an annual basis. So spend some time doing the math and see what you’re paying per advisor, per year, before you hire anyone. 

Question 3: Can you tell me more about your client base? 

Ask about your advisor’s specialties and their diversity when it comes to clients, Diamond advises. Do they typically work with entrepreneurs, small-business owners, or manage assets as large or modest as yours? This will give you a read on what your advisor is used to dealing with, and where their expertise may lie, says Diamond. If they’ve never worked with someone in your exact situation, don’t immediately be put off — talk to them for a while and see what their guidance looks like before you make a decision. 

Question 4: What can I expect from you in terms of guidance and a financial plan? 

A good advisor will create a plan for you that’s informed by their years of experience and their understanding of the market — as well as your goals and risk tolerance. Their plan may align with the one you were considering, or it may differ greatly, so before you tell them your preferences are set in stone, ask them how they would go about achieving your objectives, Cox recommends. The goal here is that you get an understanding of their technique and method so you know what to expect. 

Question 5: How often will I hear from you, and what is the best way to reach you? 

Does your advisor prefer email, phone or in-person meetings? If you have a random quick question, can you text them? If, for example, you’re only available for phone meetings on Tuesdays after 5 p.m., ask if that can work with their schedule. You’ll want to know the best way and time to get in contact with your advisor, so you’ll feel supported. 

Depending on your preference, you may want to chat with your advisor once a month or a few times a year, but the important part is to solidify a cycle of communication so you’re getting the consistency and guidance you need, Cox says. Also, if you expect same-day responses, ask your advisor how quickly he or she will get back to you when you need something. We all need an advisor who will see us as a priority, and respond to us when we need them. 

Once you start working with an advisor, pay close attention to the circumstances under which they contact you, Cox says. “If your advisor only reaches out to you when they want you to buy something, I think that’s the kind of advisor that should be terminated. An advisor should be checking in with you about your financial goals.” 

Bonus question to ask yourself: Do I feel Comfortable?

Things can get very real when you’re talking to your financial planner, and the more open you are with them, the better-equipped they are to help you. It’s a lot like therapy — they can’t make real headway if you’re not comfortable opening up to them about your anxieties and concerns. “You want someone who is empathetic and has the emotional intelligence to work with you,” Diamond says.

“If you don’t feel comfortable telling them very personal things about your life, like goals, problem areas and fears, they’re not the one,” Cox says. “You have to trust your gut. You have to have a level of connection where you are comfortable telling them the whole truth, and you will be better served if you do.” 

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