Questions to Ask a Potential Financial Advisor

Did you know that people spend more time looking for a car than a financial advisor?  It’s true.  However, it’s just as important to pay due diligence when looking for someone to advise you on your finances.  If you’re not sure what kind of questions you should be asking, read on.  If the financial advisors you are considering are unable to answer the following, they may not be the best people for the job.

1. What are Your Fees?

It is very important for your financial advisor to be transparent about the fees that they charge.  Do they charge you for their advice or do they take a percentage of any good deals you make?  Do they get paid by any of the investment companies they recommend?  Do they get commissions on any investments they sell?  And will you incur any additional costs?  Ask your financial advisor to clearly explain their fee structure and define how much they get paid both from you and any companies they recommend to you.

2. Are You Fiduciary?

Every good financial advisor should answer this question with yes.  This is vital to ensure that they are able to safeguard your assets and are held reputably by third parties.  Your advisor should be compliant with state and regulatory agencies, the Securities and Exchange Commission and FINRA (the Financial Industry Regulatory Authority).  If they are not, they may guide you in unlawful and fraudulent actions, which is not what you want.

3. What Credentials Do You Have?

The top advisors in the industry will have a number of qualifications.  Some of the ones you want to look out for include chartered financial analyst, chartered financial consultant, certified fund specialist, certified financial planner, and certified public accountant.  Think about what you want help with and find a financial advisor who has the relevant qualification.

4. How Often Do You Communicate?

The financial advisor that you choose should be easy to get in touch with, and should communicate with you regularly.  You want to know the reason behind every buy or sell decision you make, and it’s your advisor’s job to be transparent and forthcoming in explaining this.  You might also want to ask how many other clients your advisor has as this may alter how often he is able to respond or suggest new deals.

5. Do You Offer a Personalized Service?

Leading on from the point above, you’ll want to know whether you will purely be working with one financial advisor or if you’ll be working with more than one as part of a firm.  Which you prefer will be down to personal choice, but many people to prefer to work with just one advisor who knows them and the investments they have made.  Either way, it’s important to know who your direct contact is should you have any questions or queries.

6. Will You Create a Budget for Me?

A professional financial advisor should understand the importance of working with a budget and planning ahead. Creating your budget can be a bit confusing and you might not get the best results if you do it all by yourself, that’s where your advisor comes in. If you do decide to go at it by yourself I recommend reading this guide on how to make your own budget, you’ll also find a free ready-made spreadsheet you can use there as a template, remember to adjust it to your own needs.

When picking a financial advisor, you shouldn’t purely opt for the first person you come across.  Ask the above questions and make sure you are hiring someone you can trust to work in your best interests.