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How to Interview Your (Potential) Financial Adviser

Image courtesy of Stuart Miles at

Image courtesy of Stuart Miles at

As individuals need help with their finances and investments they will likely turn to the help of a qualified professional. Their future financial adviser may come via referral from a trusted friend or family member, or through an extensive Internet search. The following is a list of questions (and answers to look for) that individuals can ask their potential adviser to see if he or she is likely to be a good fit and more importantly, act in the client’s best interest.

  1. Are you a fiduciary?

If yes, move to question 2. If no, thank them for their time and move to the next adviser on your list.

Advisers that are fiduciaries are legally bound to put their clients’ best interests first. In other words, regardless of compensation, products offered or company affiliation, fiduciary advisers must act in the best interest of their clients. Everything else is secondary.

  1. How do you get paid?

This answer may vary but will generally be answered that he gets paid via commission (by selling a product), fee (hourly rate or a percent of money managed), or a combination of both. If they say salary, ask how the firm gets paid. Generally, fee-only advisers will have less conflicts of interest, however it doesn’t mean there aren’t any.

  1. Are there any conflicts of interest I need to be aware of?

Depending on the answer to question 2 will determine what, if any conflicts are prevalent. Conflicts aren’t necessarily bad, but they should be disclosed. Potential conflicts are that the adviser can only get paid if they sell you something (it may bias their advice), or if they refer you to another professional they get a kick-back. Additionally, conflicts arise if an adviser can only sell their company’s products. Also, see how they limit and reduce potential conflicts.

  1. How much experience do you have?

Every adviser needs to start somewhere and it doesn’t mean that an adviser with one year experience is worse than one with 20 years. It depends on the experience. If they have limited experience, ask if they work with other experienced advisors. What did their experience consist of?

  1. Will I be working with you or a team?

This may tie into question 4 or may be how the firm operates. For example, the firm may have an investment team, tax team, estate team, etc. It’s important to know whom you’ll be working with and your level of comfort with that individual. Some individuals prefer teams, while others prefer only one individual. Along these lines, you may ask how much turnover the firm experiences. High turnover means it’s likely you’ll have a new adviser every 6 months to a year.

  1. Do you follow your own advice?

This is a fair question to ask and will often tell you whether or not you’re working with a professional or salesperson. Granted, not all advice is going to be followed by the person giving it (i.e. I’m not planning on taking Social Security for quite some time, but I can give advice on filing strategies). But if the advice is a specific stock, annuity, life insurance, or mutual fund, ask if they own it or if they would be comfortable having a family member own it. Their reply (and their facial expression) will tell you a lot.

  1. What type of advising/planning do you do?

Some advisers call themselves advisers or planners but they really only sell one or two products or are strictly asset gatherers. By asking this question you can determine if all they care about is applying their fee to your investments or if they’re truly interested in helping you plan financially and comprehensively. If all you’re looking for is investment management, then a firm that only does investment management may be a good fit. If you’re looking for more comprehensive advice, then you may want to find a firm that does both.

  1. What are your fees?

Not only is it important to know how the adviser gets paid, but it’s just as important to know what you’re paying them. For a fee-only adviser you can ask how much they charge per hour or what percent they charge for managing your money. If they work on commission, ask what percent commission they receive on the product(s) they sell. In addition, it’s important to ask what the fees (expense ratios) are for investing in their recommended mutual funds, annuities, ETFs, and other vehicles. Higher fees generally mean lower returns.

  1. What products do you generally recommend?

This can tell you a lot on what their philosophies lay on compensation, products, and your best interests. Generally, the answer should lead to the lowest costs products for the best coverage. For life insurance this generally means term (although there are a few times permanent makes sense) and for investing it generally means low-cost passively managed mutual funds and/or ETFs such as index funds.

  1. What designations do you hold?

Generally, the first designation to look for regarding competence in financial planning is the CFP® designation. Considered the gold standard for financial planners, holders must have met an experience requirement, an exam requirement (6 hours, 175 questions), an education requirement (college-level courses in financial planning), and an ethics requirement. Additionally, CFP® professionals must complete continuing education to remain certified. Other designations may indicate specializations in an area of planning, but the CFP® requires their holders to be fiduciaries in financial planning engagements.


  1. […] great questions to ask when interviewing a financial […]

  2. Robert Brunson says:

    Did you mean, “Conflicts are necessarily bad, but they should be disclosed” or “Conflicts are *not* necessarily bad, but they should be disclosed?”

    1. sraskie says:

      Yes, should say “aren’t”.

  3. Ken Dobbins says:

    Hi Jim,
    An article in US News and World Report had an interesting piece on the proposed increase in Medicare premiums for those who met certain criteria. I’ve included the information here:
    Some beneficiaries may face steep premium increases for Medicare Part B, which provides coverage for outpatient services.

    For about 70 percent of beneficiaries, premium increases cannot exceed the dollar amount of their Social Security cost-of-living adjustment. Because no COLA is currently expected for 2016, increased costs of outpatient coverage would have to be spread among the remaining 30 percent.

    That would result in an increase of about $54 in the base premium, bringing it to $159.30 a month. It works out to paying 52 percent more.

    Those who would feel the impact include 2.8 million new beneficiaries, 1.6 million who pay the premium directly instead of having it deducted from their Social Security, and 3.1 million upper income beneficiaries, those making at least $85,000 for an individual and $170,000 for a married couple.

    The increases for upper-income beneficiaries would be higher, up to $174 a month for those in the highest bracket.

    State budgets would also take a hit, because states pay the Part B premium for low-income beneficiaries who have dual Medicare and Medicaid coverage.

    Health and Human Services Secretary Sylvia M. Burwell said no final decision has been made, and that premium increases are expected to average less than 5 percent a year over the long run.


    Every year the Social Security and Medicare trustees deliver a sober warning: neither program is adequately financed for the long haul.

    Your thoughts on this?

  4. boomerst3 says:

    By the way, most investment experts quoted in most financial journals are not CFP’s.

    1. sraskie says:

      The article was about selecting a financial adviser or planner. And if you look at the Journal of Financial Planning most experts are CFPs, as well as PhDs.

  5. boomerst3 says:

    If all you are looking for is investment advice, you do. To need a CFP. A CFP has taken one course on investing and is not an expert on that topic.

    1. sraskie says:

      Maybe one course to be eligible to sit for the exam but many have taken much more. Also, the article stated that the CFP was the minimum to look for.

  6. boomerst3 says:

    This is pretty naive. An advisor simply has to say YES I own these investments. As a matter of fact, my mother owns them! Conflict of interest? There are none! Come on

    1. sraskie says:

      Not naive, but their facial expression will say quite a bit. I would argue that most advisors would not lie. If that’s what you are assuming, then refer to question 1.

  7. boomerst3 says:

    So you are basicallyI eliminating every brokerage firm in the world with question 1. Only problem is that these brokers, who call themselves financial advisors, have their clients convinced that they are great. Investors think their Merrill broker, for example, is a financial planner, or a Sr. VP.

    1. Mark says:

      “So you are basicallyI eliminating every brokerage firm in the world with question 1.” And, that’s a bad thing?

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