12 Questions To Ask Your Financial Advisor

Finding a financial advisor is no easy task. You must consider two very important aspects: the individual’s skill in finance and your interpersonal connection with them. Technical skill is the obvious aspect to watch out for. However, you should also trust the person you hire on a deeper level. But how do you evaluate these two components before choosing a financial advisor? The best way is through an interview-like process where you ask a series of questions. Below is a list of our top 12 questions to ask prospective financial advisors.

1. Are you a fiduciary or non-fiduciary?

A fiduciary is defined as an individual or entity who manages money or property on behalf of someone else using codes of ethics and respect. In the instance of fiduciary financial advisors, they act in the best interest of their clients and no one else. This means recommending investments and financial products that genuinely are the best option for their clients.

If a financial advisor is a non-fiduciary, they may be acting in the best interest of other entities. For instance, a financial advisor who gets referral fees for recommending certain bank products to their clients would be a non-fiduciary. This is because the advisor may be motivated by the referral/commission fee, not making the best decisions for their clients.

2. What is your fee structure?

Financial advisors don’t all operate in the same way. Each one has its own fee structure and related scope of work. Some have commissions, whereas others have monthly or annual fees. Others may charge a percentage of the total portfolio under management.

Our advice? It’s best to go with a fee-only structure because it’s stable and consistent and won’t change based on external factors. But no matter what you choose, be sure to understand the financial advisor’s fees before proceeding with their services.

3. What are your qualifications and work experience?

Don’t be shy! Ask about their certifications/qualifications, education, and professional background. What are they licensed to sell/recommend? When you’ve gathered more information, consider verifying it. This could be contacting the professional body to ensure the individual was certified and remains in good standing. Or, it could be contacting past employers or clients to enquire about their work experience.

4. What’s your investment philosophy?

Not all financial advisors approach personal finances using the same strategy. Some take an aggressive approach, whereas others take a more passive approach. Alternatively, some believe in investing based on value, whereas others invest based on potential growth. Regardless, it’s a great question to ask potential advisors to ensure their philosophy is aligned with yours when it comes to money.

5. What services do you provide?

Often, financial advisors have areas of specialization. This could be retirement planning, taxation, estate planning, and much more. Furthermore, financial advisors may offer a lot of financial services, whereas others might be more limited. Either way, it’s good to ask what services your financial advisor offers to ensure they cover your current and future needs.

6. Who do you typically work with?

As with services, financial advisors tend to find a niche within their client base, too. This could be families, high-net-worth individuals, retirees, or business owners. If the financial advisor in question has a completely different client base than who you are, it may not be the right fit.

7. Who will have access to my financial information?

Some financial advisors operate as a sole proprietorship, whereas others operate like a firm. If it’s the former, the only person accessing your data should be the financial advisor. But on the other hand, if they’re a firm, other individuals in their company could have access to your data.

Ultimately, it depends on how comfortable you are with others having access to your information. Either way, it’s a great question to ask because it will communicate to the advisor that privacy and confidentiality are important to you.

8. How do you communicate with your clients, and how often?

As people, we all tend to have different preferences when it comes to communication. Some prefer in-person meetings, whereas others prefer to communicate over email. There are also video calls and texting.

The mode of communication is important, but so is the frequency. Each person will have different preferences as to how often they would like to communicate. This should align with your advisor, whether it’s weekly check-ins, monthly check-ins, or quarterly or annual reviews.

9. How will we measure performance?

Financial advisors help you get from your current financial position to your desired one. But how is success measured? A good financial advisor should be able to communicate how they evaluate performance and achievement of your specified goals. Possible metrics include tracking return on investment, reviewing portfolio performance, and measuring net worth.

10. Do you have a minimum investment requirement?

Some financial advisors only accept new clients who are willing to invest a certain dollar amount with them. If you’re well below or above the threshold, then it may not be a good fit between the advisor and the client. Also, it’s helpful to know this information before taking the next steps.

11. Can I contact a few clients you’ve worked with recently?

Contacting past clients can be a great way to scope out other clients’ personal experiences with the financial advisor. This can be from both a professional and interpersonal standpoint. Also, the financial advisor’s response to this question can be insightful. If they don’t want you to speak with past clients, there’s probably a reason.

12. What technologies do you use?

Robo-advisor and other automated, intelligent services are becoming increasingly popular in the financial advisor world. However, not everyone wants this technology to be used for their personal investments. Some prefer only humans to manage their portfolios and related financial decisions.

Final thoughts

Choosing a financial advisor can be a tricky process. After all, this person will be managing your finances! It’s important that you trust them and thoroughly investigate them as a professional. However, keep in mind that it’s a two-way street. Financial advisors investigate their clients before proceeding, too. They want to ensure their clients can afford their fees and won’t be challenging to deal with. Be sure to put your best foot forward when meeting with potential advisors!

Solomon Amos is the founder of Advisorsavvy, an online platform helping thousands of Canadians confidently find vetted financial professionals for free. After over a decade of working in the financial sector he clearly recognized the obstacles facing consumers at all ages in search of financial advice. His passion for investing started at a young age and continued throughout his career with features in the Globe & Mail, CTV News, Global Television, Yahoo Finance and CBC.