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Questions to Ask a Financial Advisor

Deciding to involve a consultant in your investment strategy can be an important step toward managing your future. Consider these tips and questions to ask a potential Financial Advisor:

Questions to ask a Financial Advisor about his or her experience

  • How long have you been a Financial Advisor? There are good advisors of all ages, but experience can count a lot in the financial field, especially the experience gained in difficult economic times.
  • What certifications do you have? Having the right credentials helps ensure a high level of competence. Advisors typically provide a list of their certifications; some certifications are not as crucial as others, while a few take years of hard study to earn. For example, CERTIFIED FINANCIAL PLANNER (CFP®) certificants are certified through a 10-hour board exam and have professional experience. Visit the Financial Industry Regulatory Authority’s (FINRA) professional designations tool for help in sorting out certifications.
  • How many firms have you worked for or been affiliated with? There’s no right answer to this, but if someone has been with a lot of firms for very short periods of time, ask why. Ideally, you’ll seek someone who has experience at reputable firms and whose practices reflect the best in industry ethics.

Questions that ask about his or her practice

  • How many clients do you have? You wouldn’t want a doctor who has to ask your name at every check-up, and the same goes for advisors. On the other hand, advisors with healthy practices may have developed systems of support that can work to your benefit, and good advisors may have more clients.  Just make sure you won’t be left in the waiting room.
  • What is the average length of your client relationships? Generally, it’s a good idea to select someone with a solid history of satisfied clients. Think relationships, not transactions, and think how long you like your own relationships to last.
  • What are your average assets under management? Make sure your advisor has experience with your level of affluence and your needs.
  • Do you focus on managing any specific types of investments? Some Financial Advisors specialize in specific areas — such as socially responsible investments or investing after a divorce. Specialties can be beneficial, especially when they match your goals.
  • How and when are you compensated for your services? Clear communication on this important topic can take you a long way toward trust with your advisor. Does your advisor charge a fee or a commission? Is he or she paid more to sell certain types of products (for example, proprietary products offered by that firm)? What other expenses, beyond advisor compensation, might you need to pay? Insist on absolute transparency.

Questions that ask about his or her approach to client service

  • What is your approach with new clients?  If the answer doesn’t prioritize listening to your needs and goals, consider someone else. Ask if the advisor has a process or roadmap that helps lead clients toward achieving their goals. Also, make sure the advisor’s viewpoint on investing is neither too cautious nor overly aggressive for your preferences or risk tolerance.
  • How often do you meet with new clients to review goals and objectives? For both of you to get to know each other and build trust, you’ll likely need more than one meeting.
  • How does your role change over time, as new clients become established clients? As with most of us, life brings changes, such as marriage, children, college, retirement. An advisor should stay in touch with your changing circumstances, even after you’ve gotten to know each other.
  • What do you think are the most critical components to reaching a client’s goals? The relationship you build with your advisor holds the potential to be more valuable than any individual investment.  Answers should include things like the advisor’s philosophy and process, periodic progress reports, open communication, and trust.
  • What are your typical thoughts on managing risk versus seeking reward in a client’s portfolio?  A prudent advisor will answer with a well-considered process— and an important part of that process will involve your answering this same question. Keep in mind that your comfort level with risk needs to be balanced with your goals, age, individual circumstances, and several other factors.

 Check their credentials 

BrokerCheck provides an advisor’s employment history, registrations, and more.

Considering working with an advisor?