In some of our previous article that focused on financial planner which can be found here, what discussed extensively on who a financial planner is, how they can save you money and how you can hire one.

However, when deciding to hire a financial planner, a lot of work and research has to go into it. You need a financial planner with some years of experience, track record of trust and so on.

To help you make an informed decision, this article contains some questions you need to ask a financial planner before hiring. We have also added some additional tips to help you get a financial planner that will match your lifestyle and financial needs.

20 Questions you Need to ask your Financial Planner

The interview process is your chance to learn about a financial planner’s qualifications, fees, investment strategy, and the way they relate to clients.

However, before you start asking them questions about any of these subjects, there’s one question you need to ask yourself: What are you looking for in an advisor?

Read Also: How to Hire a Trusted Financial Planner

Think about what kind of services you need and what you’re willing to pay for them. Also, consider how closely you want to work with your financial advisor.

Do you want frequent, in-person meetings to keep you informed about all the details of your finances? Or would you prefer just an occasional call or email when something needs attention?

Thinking about these questions ahead of time will give you a good idea of what you want from a financial planner. As you work your way down this list of questions during the interview, you’ll know what kind of answers you want to hear.

1. What Are Your Credentials?

According to U.S. News & World Report, you don’t need any training or experience to call yourself a financial advisor.

The Financial Industry Regulatory Authority (FINRA) lists more than 200 professional designations that fall into the general category of financial advisors, some of which require as little as a single weekend of training. But if you’re trusting someone with your money, you’d naturally like them to have more qualifications than that.

Many financial advisors have special credentials beyond the basics. Different types of financial advisors use different titles, such as:

• Certified Financial Planner (CFP). People with this title are trained to help you with your finances as a whole. To become a CFP, they must take courses, pass a rigorous board examination, and have several years of experience. They also pledge to follow certain Rules of Conduct, including the fiduciary standard.
• Chartered Financial Consultant (ChFC). Financial advisors with this title have completed the same basic courses as a CFP. However, they have not passed the board exam or completed as many years of experience.
• Chartered Financial Analyst (CFA). CFAs focus specifically on investing. The title requires two years of courses, four years of professional experience, a series of exams, and specific ethical standards. According to Forbes, only 20% of those who apply for this designation from the CFA Institute actually qualify for it.
• Registered Investment Advisor (RIA). An RIA also specializes in investments. RIAs must meet the fiduciary standard and, depending on how much money they manage, may need to register with the SEC.
• Certified Public Accountant (CPA). CPAs are accountants who have completed courses, passed an exam, and worked in accounting for at least one year. They’re qualified to help you with special tax needs, such as estate planning.

Which type of financial advisor you choose depends on your needs. For instance, if you want help choosing investments for retirement, you could hire an RIA or CFA. If you want to develop an overall financial plan, you could hire a CFP or ChFC.

If none of these titles sounds quite right, check out the professional designations database from FINRA. It can tell you what specific titles mean, what education they require, and what organization backs them up.

You can also see whether the organization maintains a list of official complaints or provides a way to check up on those who hold the title.

2. Are You a Fiduciary?

The right answer to this question is yes. Fiduciaries are financial advisors who meet the fiduciary standard, which requires them to:

• Place the client’s interests ahead of their own
• Disclose all their fees
• Explain how they’re compensated
• Reveal any potential conflicts of interest

If your financial advisor is a fiduciary, they must always act in your best interests, even if they make less money that way. For instance, an investment advisor who is a fiduciary must choose the investments they think are best for you.

By contrast, a non-fiduciary advisor only needs to choose investments that are “suitable” for your needs. They could recommend investments that have higher fees or lower returns than others because they receive a higher commission from the company that sells them.

If you want to make sure you’re getting sound, impartial advice, only choose an advisor who meets the fiduciary standard.

3. How Do You Get Paid?

Financial advisors can make their money in a variety of ways. These include:

• An hourly wage
• A specific fee for a specific service
• A percentage of the assets they manage
• A commission on sales of specific products

The way advisors get paid can affect the decisions they make. For instance, as noted above, if they earn a commission for selling certain products, they have an incentive to sell those products whether they fit your needs or not.

If they get a fee for each trade they make in your account, they have an incentive to make lots of trades, even when you might be better off with a “buy and hold” strategy.

To avoid these problems, look for an advisor whose payment is “feeonly.” That can mean a flat fee for services, an hourly rate, or a percentage of your assets. Regardless of how the fee works, a fee-only financial advisor works for you and you alone.

4. What Services Do You Provide?

To compare financial advisors, you have to know not only how much they charge, but also what you get for your money. For instance, some advisors can set up a financial plan for you but not manage your assets.

Others provide only investment advice, while others focus on specific aspects of your finances, like retirement, insurance, or tax planning.

Before you hire a financial advisor, you need to know what services are included with the fees you pay and what costs extra. For instance, suppose you hire a CFP to set up a financial plan for you.

That plan might include setting up and maintaining a trust, a service that isn’t included in your base fee. Or it could include writing a will, for which you’d need to hire a lawyer at an extra cost.

You can also pay extra fees for specific investments. A mutual fund with a 1% management fee could cost you thousands of dollars each year compared with a low-cost index fund.

To account for these fees, ask prospective financial advisors about your “all-in costs” for their services. This lets you compare apples to apples by looking at the total cost you’ll pay with each provider.

5. What’s Your Investment Philosophy?

A good financial advisor should tailor their advice to fit your needs. However, their investment philosophy — their overall approach to choosing investments — will inevitably influence their recommendations.

For instance, an advisor who’s a big believer in keeping costs low will probably steer you toward index funds rather than actively managed funds.

Experts say you’re better off with a financial advisor whose overall investment philosophy matches your own.

For instance, if you like to stick to simple investments you can easily understand, you probably won’t be happy with an advisor who likes to move money around in complicated ways to maximize your return.

Even if their strategies work, the fact that you don’t understand what’s going on with your money will make you nervous.

That could lead you to panic and bail out if the market suddenly takes a downturn — which is exactly the wrong time to sell. A financial advisor who’s on the same page with you will give you the confidence to stick to your plan through the market’s ups and downs.

One way to get a sense of a financial investor’s philosophy is to ask them what they like to do with their money. If they invest in the same general way as you, you can feel confident that the advice they give you is the same advice they’d follow themselves.

6. How Will You Pick Investments for Me?

When it comes to investing, you don’t want to put all your eggs in one basket — not even if it’s a really big basket. A good financial advisor doesn’t just put all your money into one type of investment, such as large-cap U.S. stocks.

Instead, they choose a mix of different investments, such as bonds, real estate, and different types of stocks.

There’s no such thing as a one-size-fits-all asset allocation. Your financial advisor should tailor your portfolio to fit your needs, based on several factors:

• Age. The closer you are to retirement, the less risky your investments should be. This usually means keeping less in stocks as you age and more in lower-risk investments.
• Risk Tolerance. Some people are willing to take big risks with their money in pursuit of big gains. Others like to play it safe and protect their capital. Your financial advisor needs to know and respect your risk tolerance when choosing investments.
• Goals. How you invest depends on what you’re investing for. Saving up to buy a house within the next two years is very different from investing for a long-term goal like retiring 30 years from now.
• Tax Considerations. Depending on your goals, there could be specific funds that will help you avoid taxes on your investments. Examples include IRAs for retirement funds, health savings accounts for medical expenses, and 529 plans for college savings. A good advisor can tell you how much you should expect to pay in taxes on your accounts and how much you’ll be able to keep after taxes and fees.
• Other Assets. Chances are, your financial advisor won’t be managing all your assets. They should know about and factor in the assets outside their control, such as your workplace 401(k). This will ensure your financial plan works as a whole.

The financial advisor you choose should take all these factors into account when choosing investments for you. Look for someone who understands your situation and can explain how they’d select investments to fit it.

Note: If you have a 401(k) or IRA, make sure you also sign up for a free analysis from Blooom. After connecting your accounts they’ll check to make sure your asset allocation aligns with your risk tolerance.

They’ll also make sure you’re properly diversified and aren’t paying too much in fees.

7. What Benchmarks Do You Use?

Picking investments for your portfolio isn’t just a one-time job. Your financial advisor should also keep an eye on your investments and change them if they don’t perform up to snuff. To do this, they need a benchmark — a standard they measure the performance of your investments against.

One simple benchmark is the S&P 500 index, which tracks the overall performance of the stocks of the largest 500 companies in the U.S. But unless you plan to invest in nothing but large-cap stocks, it isn’t a very good benchmark for your entire portfolio.

If you’re putting money into riskier investments, then beating the S&P 500 should be easy, and if you’re investing conservatively, it’s not realistic. For money you expect to need within the next few years, a more reasonable benchmark would probably be simply keeping up with inflation.

Your financial advisor should tell you how they chose a particular benchmark to measure your portfolio against. If it isn’t directly related to the investments they’ve chosen for you, they should be able to explain why.

They should also have a plan to get your investments back on track if they don’t measure up to the benchmark.

8. Who Is Your Custodian?

Most financial advisors work with a specific business, such as a bank, brokerage, or insurance company, that serves as a custodian for your money.

For instance, instead of placing your money directly in your advisor’s hands, you put it into a brokerage account, and the advisor manages that account for you.

When your advisor sends you a statement telling you how much is in your account, you can go directly to the custodian to confirm it’s accurate. It ensures that your advisor can’t redirect your money elsewhere without your knowledge, as Bernie Madoff did with his clients.

Any honest advisor should have an independent custodian and tell you who that custodian is. You should always be able to connect with the custodian directly to check on the status of your account, instead of having to go through the advisor.

Any financial advisor who won’t name their custodian, or who insists on being your only point of contact with the custodian, clearly has something to hide.

9. Who Are Your Typical Clients?

If you have specific investment needs, it’s a good idea to choose an advisor who’s used to dealing with them. Many financial advisors work with specific types of clients and understand their particular needs.

For instance, an advisor who works mostly with millennials is likely to know all about matters like refinancing student loans, writing a prenuptial agreement, or saving for your children’s education.

An advisor who works with small-business owners will know how to handle business tax deductions, set up a SEP IRA, and create a health plan.

Edward Wacks, a CPA and CFP interviewed by Forbes, says one good way to find a financial advisor who understands your needs is to look for someone close to your own age.

According to Wacks, most advisors tend to choose clients within 10 years of their age. For instance, he deals mostly with people nearing retirement because he’s in his early 60s, so he “understands their issues.”

10. How Much Contact Will We Have?

A financial plan isn’t something you can simply set up and allow to run on its own. You need to check it from time to time to make sure it still fits your needs as your life changes. To do this, you need some kind of regular contact with your advisor.

Some financial advisors are more hands-on than others. Some like to meet in person every few months, while others limit meetings to once per year. Either approach can work, as long as you’re comfortable with it.

But if you need lots of support and your advisor prefers to keep contact to a minimum, you’re not going to be comfortable with the relationship.

If you’re not sure how much contact you want with your financial advisor, experts generally say more is better, especially early on. It’s best to stay in close touch with your financial advisor when you first start working together.

And even once your financial plan is up and running, most good advisors will want to meet with you at least twice per year to make sure your plan is up to date.

Aside from these regular meetings, your advisor should be available at other times to answer any questions you have. These in-between contacts can take place by phone or email instead of face to face. The important thing is that you know you can always reach your advisor when you need to.

11. Does Anyone Else Work With You?

Some financial advisors always deal with you directly, one on one. Others work as part of a team. In these cases, you could have one regular annual meeting with the financial advisor but talk to another staff member at other times throughout the year.

Either approach is fine; it’s a question of what you prefer. Some people would rather deal with the same person every time so they can build a closer working relationship.

Others like working with a team because if their financial advisor is unavailable for any reason, there’s always someone else on hand to answer their questions.

12. What’s Your Succession Plan?

Nothing in this world lasts forever, including your relationship with a financial advisor. Sooner or later, your advisor will retire or change jobs, and you need to know what will happen to your money at that point.

A good financial advisor will have a plan in place for this situation. For instance, they could have a written document listing your financial goals, current investments, and what changes you plan to make to them over time. They can pass this document on to their successor whenever they leave the business.

Having a plan won’t make the changeover completely seamless. You’ll still have to build a relationship with a new financial advisor from scratch. But at least you’ll know you’re dealing with someone who understands your financial situation and needs.

13. Can I See a Sample Financial Plan?

Financial planners differ not just in how often they like to see you, but also in how much information they give you when they do.

Since there’s no set format for a financial plan, the document your financial planner shares with you could be anything from a five-page summary of your financial situation to a 50-page report stuffed with graphs and charts.

For some people, lots of information is a good thing. They want to know all the ins and outs of their finances, so the more details their advisor can provide, the better. Others find too much information overwhelming and want their advisor to boil the situation down to its essentials.

Asking to see a sample financial plan at the interview gives you an idea of how much information to expect in your dealings with a financial advisor. That way, you can choose one who likes the same level of detail you do.

14. Why Should I Choose You?

There’s one final question to ask a potential financial advisor, and it’s a bit more subjective than the others: “Why should I choose you over the other financial advisors I’m interviewing?”

An experienced financial advisor should know how to answer this question. For instance, Sophia Bera, a CFP interviewed by Forbes, says she likes to pitch herself to clients as “your financially savvy best friend.” Her main focus is on investing her clients’ money in a way that fits their values.

This approach would be ideal for a client who’s interested in socially responsible investing, but maybe not for one who just wants to earn the highest possible return.

There’s no right or wrong answer to this last question, but a good financial advisor should have an answer. It tells you they’ve put some thought into how they work with clients and what kind of relationship they want to have. Based on this information, you can choose a planner whose approach is right for you.

15. How will you determine my asset allocation?

This is a great question to ask, as it really gets to the heart of whether you’ll receive personalized attention. If an advisor states that all clients hold the same allocation, or they offer an allocation without knowing much about your finances, this is a point of concern.

Ideally, they should only offer investment advice after exploring your current finances, long-term goals, and risk tolerance.

16. Where will my assets be held?

Knowing who holds or custodies your assets is important. Many advisors use a third party custodian such as Charles Schwab or Fidelity. Doing so provides a checks-and-balances system to avoid potential improper accounting.

17. Are there additional fees for financial planning?

Find out if you have to pay extra for financial planning services, and if so, the cost. Planning ahead is an important and ongoing aspect of your financial success. Additional fees might dissuade you from engaging in financial planning on a recurring basis.

18. How often will my financial plan be updated?

Sometimes a financial plan is only prepared at the onset of your relationship. SageVest incorporates full planning updates on a recurring basis.

19. Does planning software use an effective tax rate?

Some financial planning software programs include detailed tax planning, based upon specific income and tax facts that your advisor inputs each year.

However, many programs utilize an effective tax rate, which holds your taxes at a constant percentage, regardless of changes in your income or deductions. This can lead to grossly inaccurate planning results.

20. What are your fees?

Fee arrangements vary widely. Ask how fees are calculated and how your advisor is compensated.  Fee-only advisors are compensated directly by the client. Fees are transparent, and the advisors don’t receive any hidden compensation for the advice they render.

Advisors who are fee-based not only collect a fee from the client, they also accept commissions and compensation from the products or services they recommend.

What Should I bring to a Financial Planner Meeting?

You’re ready to get organized, grow your money and get a jumpstart on big goals like retirement, paying down debt or even that family vacation you’ve been dying to take — so you finally take the plunge and book an appointment with a financial advisor.

Except now you’re not sure what you’re supposed to bring to the table (other than yourself, of course). And we don’t blame you — sifting through financial paperwork is not fun (for most of us, at least).

But it’s key to have the right information with you because the more transparent you are, the more your advisor can help you make progress on your goals, budget for the things that are important to you today, and see your financial big picture.

Bill Taylor, vice president, distribution performance for Northwestern Mutual provides some insights into what you should carry with you.

First, bring your spouse if you have one, because you both need to be involved. And bring pen and paper, because you want to take notes and really be open-minded about the process. Then as far as the actual paperwork to bring, he suggest:

• A budget, if you have one
• Pay stubs
• Statements/details about any investments
• Any insurance policies you have
• An employer benefits statement
• Tax returns for the past two or three years
• Statements/details on any debt you owe (mortgages, credit cards, student loans, business loans, personal loans, etc.)
• Information on any trust funds you may be a beneficiary to

Your financial advisor wants to get a sense of your assets and liabilities so they can assess your situation. And if you’ve ever had a financial plan in the past, bring that so your advisor can understand what you’ve been working with.

But what if you don’t have a budget at the moment?

A financial advisor will want a decent idea of how you’ve spent your money in the past, so even having an informal budget you just wrote by hand can help.

If you don’t have that, bring your credit card or debit card statements, because then he or she will be able to see trends in your spending or know, for example, if you’re eating out all the time.

One of the things people don’t necessarily forget about, but are often reluctant to talk about, is their credit card debt. They are better with student loan debt because they view it as an investment, but they are usually embarrassed by the amount of credit card debt they have.

Sometimes they just don’t want their spouse to know how much debt they have or even how much they make — that happens more often than you’d think. That’s why it’s important to have everyone at the table.

Read Also: Top Earning Certified Financial Planners

And many people don’t usually think about bringing their benefits statement, but it helps an advisor see what your total compensation really includes — things like incentive pay or stock options, for example. It’s also helpful to see if someone’s getting disability or life insurance through an employer. 

Summary

The idea of grilling potential financial advisors with this list of questions might make you feel a little uncomfortable. However, it’s no more than they expect.

They understand the relationship between advisor and client is an important one and you need to make sure you’re a good fit for each other.

If you feel awkward because you know a lot less about personal finance than the person you’re interviewing, just think of the process as a job interview. Any time you hire someone for a job, you naturally have to check their qualifications. Hiring a financial advisor is no different.

When you conduct an interview, think not just about how each candidate answers these questions, but also about how they word their answers.

You want an advisor who can communicate clearly about your finances, not make you more confused. If a candidate responds to your questions with a lot of jargon that makes no sense to you, cross that person off the list.

As you go through the interview process with each advisor, let them know you’re also interviewing other people for the job. That way, they won’t expect you to make a decision on the spot.

Your financial advisor is going to be an important person in your life, so take the time to consider all the candidates and choose the one who’s best for you.