Questions to Ask a Financial Advisor

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on August 10, 2023

Are You Retirement Ready?

Why Hire a Financial Advisor?

Financial advisors are professionals that guide their clients toward making intelligent financial decisions.

They offer advice and services related to investments, retirement, estate planning, tax strategies, insurance, and other related topics.

They have the experience to effectively assess a client’s financial situation and provide tailored solutions.

Although clients can always manage their finances independently, financial advisors offer a neutral perspective that may not otherwise be available.

Ultimately, working with a financial advisor can help you achieve your financial goals faster and more efficiently.

However, since your choice of a financial advisor may significantly impact your finances, it is essential to be informed and ask the right questions before selecting one.

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Here are 12 questions to consider when researching and interviewing potential advisors:

Question #1: Are You a Fiduciary?

A fiduciary is a financial professional with a legal obligation to act in their client’s best interests.

They must adhere to high standards of ethics when providing financial services and advice. Simply put, they are expected to place their client's interests ahead of their own.

Financial advisors registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are fiduciaries and must abide by regulations.

However, not all financial advisors are expected to act as fiduciaries.

Some advisors only abide by the suitability standard, meaning they can offer products that are merely acceptable instead of the most appropriate one for their client.

A financial advisor who is required to act as a fiduciary has increased accountability.

Thus, clients can rest assured that their advisor’s recommendations and services are being given for their sake and not just to earn a commission.

Question #2: What Services Do You Provide?

Financial advisors can provide various services tailored to meet their clients' needs.

A good one will take the time to understand your life stage and objectives before recommending any particular strategy or product.

The following are examples of services financial advisors can provide:

  • Portfolio Management - Financial advisors help set investment objectives, build or maintain a diversified portfolio, and monitor investment performance. They can also recommend and execute trades on your behalf to maximize returns.

  • Cash Flow Planning - Financial advisors can advise clients on managing cash flow by creating an emergency fund or sharing budgeting strategies. This service also considers all income sources, reviews expenses, and forecasts changes.

  • Tax Planning - Financial advisors understand the finer points of tax law and can help you maximize your deductions and credits. With this, they can create strategies to minimize tax liability while remaining compliant with government regulations.

  • Estate Planning - Financial advisors can work with you to develop an effective estate plan. This can include organizing your assets to ensure they are distributed according to your wishes when you pass away.

  • Educational Expense Planning - Financial advisors can help you develop a plan to achieve your educational objectives. They can also advise you on how to save money on tuition costs through state and federal grants, scholarships, and student loans.

  • Retirement Planning - Financial advisors can support you in evaluating investment options, creating a budget, paying down debt, and determining the appropriate amount of insurance coverage based on your life stage. This ensures that you have enough money saved for retirement.

  • Charitable Planning - Financial advisors can help you decide how to donate money and assets to charities. This can include structuring gifts for tax advantages and creating a strategy for distributing these assets over time.

Whichever life stage you are in, check if your prospective financial advisor is offering services that match your goals, needs, and expectations.

Question #3: What Is Your Investment Philosophy?

An investment philosophy is a set of principles and beliefs that guide decisions about investing.

It can include the desired rate of return, the level of risk they are willing to take, the types of investments they feel comfortable with, and overall financial goals.

A potential financial advisor should be able to explain how they make decisions when selecting investments and why they believe specific strategies will generate the most significant returns for you.

It is vital that your investment philosophies are aligned, as you will be counting on the financial advisor to make decisions about your money.

Open communication about their beliefs and how they may differ from yours will help ensure a successful partnership.

Question #4: Who Are Your Typical Clients?

Financial advisors can serve individuals and families, companies, trusts, or other organizations.

They can work with clients with various financial goals, such as retirement planning, estate planning, investment management, or tax preparation.

Many advisors specialize in specific areas and a certain clientele, such as high-net-worth individuals, business owners, or retirees.

They should be able to provide information regarding the types of clients they have served in the past and what solutions they provided for them.

This will give you a better understanding of how successful the advisor has been in helping clients achieve their financial objectives.

Knowing an advisor’s typical clientele will also help determine if their services suit your needs.

Question #5: What Are Your Qualifications?

A good financial advisor can provide proof of their licenses, credentials, education, and experience. These qualifications help you gauge the competence of your potential financial advisor.

Depending on the type of services you need, you can check if your potential financial advisor holds certifications like Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), or Certified Public Accountant (CPA).

Then, you must ensure they are appropriately registered by checking SEC’s Investment Adviser Public Disclosure (IAPD)website, FINRA's BrokerCheck tool, or contacting your state's regulators for additional information.

Finally, it is also good to check if they are members of professional organizations that require their members to adhere to certain standards when providing their services.

An excellent example is the National Association of Personal Financial Advisors (NAPFA).

Question #6: What Is Your Fee Structure?

Financial advisors earn in different ways. The following are the most common financial advisor fee structures:

  • Assets Under Management (AUM) Fees - These fees are charged based on a percentage of the total assets managed by a financial advisor. Generally, AUM fees range from 0.5% to 2%.

  • Hourly Rate - Financial advisors may charge an hourly rate for consultations and advice. Depending on the advisor, this rate can range anywhere from $200 - $400 per hour.

  • Flat Fees - Financial advisors may also charge a flat fee for services like financial planning. Depending on the project’s scope, this can range anywhere from $1,000 - $3,000.

  • Commission-Based Fees- These are earned based on the products your advisor recommends and are usually paid for by the financial institution issuing the product. However, this can motivate advisors to recommend products for personal monetary gain.

It is vital to understand the fee structures associated with a particular advisor before engaging in any services.

You can begin by asking if your potential financial advisor is fee-only or fee-based.

Fee-only advisors charge hourly, flat, or AUM fees. In contrast, fee-based advisors offer similar fee structures, but they may also earn a commission from selling products or services, which increases their potential conflict of interest.

It is also essential to determine if other costs are associated with an advisor’s services, such as custodial fees, tax preparation fees, research fees, or account maintenance fees.

Asking all these ensures you understand what you are paying for and if it is within your budget.


Question #7: How Often Do You Communicate With Your Clients?

Financial advisors need to communicate with their clients regularly.

This will allow them to keep their clients informed about any changes in the market or new investment opportunities that may arise.

Typically, advisors meet clients face-to-face, but some also offer personalized email or phone updates as needed.

Some advisors prefer to meet with clients quarterly, while others are comfortable meeting bi-annually or monthly.

Ultimately, it is up to both parties to determine how often communication will be.

Be sure to discuss your expected frequency and mode of contact with your financial advisor before signing any documents.

Question #8: Who Will Have Access to My Information?

Confidentiality and security are paramount.

This is because you might provide your financial advisor with sensitive details not only about your finances but also about your professional and personal life, depending on the particular services you require of them.

Therefore, it is essential to ask your potential financial advisor what security measures they have to protect your data and if they share any of your personal information with third parties.

Your financial advisor should be able to provide a record of anyone outside their firm who has had access to your confidential information.

Additionally, they must ensure that their IT infrastructure meets all applicable cybersecurity and data protection regulatory requirements.

Question #9: How Will We Measure Progress?

A financial advisor should be able to provide you with a complete assessment of your current financial situation, including your investments, income, and expenses.

They should then offer a plan for how to reach your desired goals.

Finally, an advisor should produce regular reports that clearly outline how their services impact your finances.

This allows you to track progress and hold them accountable for delivering results.

Measuring progress towards your goals can be done by tracking the return on investment (ROI), reviewing the portfolio performance each quarter, and evaluating whether the goals set at the beginning of the engagement are being met.

Other metrics include monitoring cash flow, net worth, and liquidity and comparing savings against expected outcomes.

Question #10: Who Will Be Available to Work With Me in Your Absence?

It is crucial to have continuity of service even when the primary financial advisor is unavailable.

A good financial advisor should provide an alternate representative who can assist in all service areas, including investment management and financial planning.

This includes having technology solutions, such as automated payments and online services, that can help minimize disruption if the advisor is unavailable.

They should also have a backup system in place so there are no surprises if they cannot communicate with you.

Access to multiple people means that no matter what life throws at you, someone is there to care for your interests.

Question #11: Do You Have Any Disclosures on Your Record?

Disclosures are public records that provide information about the financial advisor’s compliance with industry regulations.

These records may be filed with regulatory agencies or other state and federal authorities, such as the SEC or FINRA.

Aside from asking your potential financial advisor this question, you can also check the actual records from government agencies.

For instance, you can use the SEC Action Lookup - Individuals (SALI) to confirm their answers.

The disclosure documents will provide detailed information regarding previous complaints, investigations, disciplinary actions, or client disputes involving your potential financial advisor.

Performing due diligence when researching potential advisors is essential to make an informed decision about whom you are entrusting with your finances.

It would be best to stay up-to-date on changes made to their record over time.

Question #12: Do You Have a Minimum Investment Requirement?

Some advisors may require that their clients have a certain amount of assets before they accept them as a client.

Knowing this information is essential in determining whether or not a particular financial advisor is the best fit for you and your goals.

The minimum investment requirement is usually determined by the complexity of an advisor’s services and how much work it takes to manage those investments properly.

For instance, some advisors charge AUM fees, while others charge a fee based on how much time they spend managing your portfolio.

Therefore, if an advisor has a minimum investment requirement that does not currently meet your own, you will want to consider other options.

Be sure to ask whether or not the minimum investment requirement is flexible.

Some advisors may be open to waiving this requirement if they find that you are a good fit for their services and have an understanding of your financial goals.


Final Thoughts

Finding the right financial advisor for you can seem daunting. However, by asking the right questions and performing due diligence, you can be confident that you are making the best decision for your future.

When selecting a financial advisor, be sure to ask your candidates questions about crucial factors, such as their qualifications, fee structure, investment philosophy, client base, and services provided, to understand how they operate and if they will be a good fit for you.

By taking these precautions before signing on with any particular advisor, you can have peace of mind knowing that your financial affairs are being managed by the very best.

12 Questions to Ask a Financial Advisor FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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