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How Well Do You Know Your Financial Advisor? 5 Questions You Should Ask


How do you choose the right person to guide you in financial matters? Since the person you choose will be privy to some very personal information, you need to ask the right questions before you start a relationship with them. Don’t hesitate to interview a prospective advisor and get a feel for that person’s style before deciding whether to work with them. If you are already working with a financial advisor, it’s never too late to ask questions about your plan and why your advisor has recommended a certain investment for you.

5 Questions to Ask your Financial Advisor

What are your qualifications for working in the financial services industry?

Not everyone working in this industry has the same credentials. It is important that the credentials that a financial advisor has are relevant to the work they are doing. For instance, if they are buying and selling stocks they must have their securities license and further licensing to sell more complex financial products (i.e. options license). If the advisor sells insurance they need to have the suitable insurance licenses (you need a separate license to sell car insurance than to sell life insurance). If you want a financial plan, a Certified Financial Planner (CFP) is licensed and qualified to provide detailed financial plans.

Be sure the advisor you choose to work with has the qualifications necessary to meet your financial needs. For example, I am a Certified Financial Planner (CFP) and have my Financial Management Advisor (FMA) designation. I am also licensed to sell securities such as mutual funds, stocks and bonds and insurance products (disability, critical illness and life insurance). These designations qualify me to be a full service, one-stop financial advisor for my clients. I can manage their money, provide advice and detailed financial plans, protect their family and income through insurance solutions and help make estate planning recommendations.

What kind of experience do you have in the industry?

It important not only to know your advisor’s qualifications but also what their experience is, so ask a few questions before deciding who you are going to work with. For instance, I have been in the industry for more than 27 years with the same firm. Ask the advisors you are interviewing how long have they been in the industry and how have they been with the company they are working with.

How many other firms have they worked for? If they move around firms frequently you might want to ask why. You don’t want to sign up with a new advisor just as they are changing firms again. If the advisor is new to the industry, ask what their previous career was and why they made the switch. You don’t want to be handing over your nest egg to just anyone. Get to know your advisor before making any decisions.

How do you get paid?

All financial advisors, financial planners or investment advisors get paid in one way or another. It may be 100% commission, commission plus fees, fee only or salary plus bonuses. One way is not better than another to earn income as an advisor as long as clients understand how their advisor is being paid and what exactly they are being paid for.

How much do I pay for your services?

By hiring a financial or investment advisor, you will pay some sort of fee. It might be an up-front fee such as commissions on trades or quarterly management fees. Sometimes the fees are embedded within the investments, as mutual funds often are. For example, I tend to use mainly managed investment pools that incorporate fees into the unit prices. So clients do not pay me directly but instead I am paid by the financial firm whose investments I sell.

Ask the advisor about their fees before deciding to work with them to be sure you are both on the same page on what you agree to pay for the services offered.

What is your investment style?

Every advisor has his or her own style or philosophy when it comes to investing. Some advisors are more risk takers than others. Some trade frequently, while others prefer to buy quality investments and just hold. It is really important to understand your advisor’s investment style to be sure it is in line with what you’re comfortable with.

Who is your ideal client?

In the same way that other professionals develop specialties, advisors prefer to work with certain types of clients – maybe retirees or medical professionals, for example. Asking this question will help you discover whether you and your portfolio would be a good fit for that advisor. For instance, I tend to work with the middle class baby-boomer who has little time but a sizable portfolio ($250,000 and up) and needs someone to step in to help put their financial house in order; develop a financial plan and conduct an insurance review, educate on pensions and retirement options, manage money, create cash-flow in retirement, provide recommendations for estate planning and on and on.

I know it can be difficult to ask financial professionals questions concerning their business practices but it’s crucial to do before handing your money and your financial future over to someone new.

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