Always interview several financial advisors before you chose one. Use these interview questions for financial advisors as your guide. It’s a lot like a key hire at work – but far more important to your personal life. Think of your financial advisor as a “CFO” for your family.
Here are 19 interview questions you should ask financial advisors – preferably before you start working with them. Number 16 is especially important. Plus, the personality litmus test.
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Asking interview questions for financial advisor is much like interviewing for a key position at work. Makes sense, since choosing a financial advisor is one of the most important financial decisions you’ll make during your entire working life. It’s akin to hiring a CFO for your family. Hopefully you’ll make it wisely enough that you only need to make it once or twice.
Before choosing a financial advisor (sometimes called a wealth manager), be smart about your hiring decision. You’d never dream of hiring someone to work for your company without interviewing them. Interviewing a financial advisor is no different.
First, you’ll want to go through our steps for finding three to five top candidates. Once you’ve done that, you’re ready to interview. Well, almost ready… First you need to decide what to ask each financial advisor.
Ask each financial advisor the same set of questions. Then you can compare their answers. Do any of your questions make any of your candidates feel uncomfortable or act evasively? That could be a red flag.
But first things first. Before proceeding, ask yourself… What type of financial advisor am I looking for?
- A robo-advisor (for simple, automated investment portfolio advice)
- Personalized financial advice done virtually via phone or Zoom
- Local face-to-face financial advisor who can address more complex situations
For anything beyond a robo-advisor, ask these 19 important interview questions for financial advisors.
19 Interview Questions for Financial Advisors
1. Are you a fiduciary?
This is a key question when it comes to financial advisors…
The answer to this first question should be a resounding “yes.” A fiduciary must by law put your interests above their own. Many financial advisors abide by the lower standard of suitability. This means they can collect a commission on a product you might not need or can’t afford.
2. How do you get paid?
Advisors can charge clients in a variety of ways, discussed in more detail in our article on financial advisor types.
Do they charge you a percentage for assets under management? Are they fee-only? Or fee-based (taking a fee for a plan plus getting commissions on products sold)? It all makes a difference. If they’re anything besides fee-only, expect them to pitch other products to you. In our experience, it happens every time. And it can be hard to resist.
3. Who else do you get paid by besides your clients?
Fee-only financial advisors get paid only by their clients. Not by insurance or annuity sales or a combination of fee plus commission. This is generally the approach we recommend for the least conflict of interest. It’s not perfect, but little in this world is.
Note that if they are a fee-only financial advisor they may appear expensive, because there’s no back-end sales commission possible. On the other hand, you won’t get sucked into buying something you don’t need.
4. What are my all-in costs?
Fees can decimate your investments over time. You can vaporize half your net worth without even realizing it. A NerdWallet analysis found that a 1% mutual fund fee could cost millennials $590,000 in retirement savings. Do you want to line their pockets or your own?
Be vigilant about fees. Decide if you’d be better off learning how to evaluate investments for yourself and saving the fees. If you’re disciplined, being a DIY investor and getting occasional advice can work just fine.
5. What are your qualifications as a financial advisor?
Finance pros can have extensive training, or almost none at all. It doesn’t take much to be able to hang out a shingle calling yourself a financial planner. Ideally, look for credentials such as CFP® (Certified Financial Planner), CFA (Chartered Financial Analyst), or PFS (Personal Financial Specialist).
This is actually something you should be able to find on their website. But vet it anyway. Don’t just assume they’re telling the truth without verifying.
6. What is your investment philosophy?
You want to know and understand your financial advisor’s approach and be sure it aligns with yours. That makes this one of your most important interview questions for financial advisors.
Do they recommend individual stocks or mutual funds? How do they select the investments in your account? And how often do they rebalance your accounts? Be sure to ask them the “why” behind their answers.
You’ll have a hard time trusting them and sleeping at night if your investment philosophies collide. Find someone whose financial philosophies broadly align with yours.
7. What asset allocation will you use?
This is an often-overlooked question for financial advisors.
You probably know you should be diversified, right? So don’t hire someone who only picks one single type of stock.
If you’re in individual stocks, your portfolio should include a blend of domestic and international stocks and small-, mid- and large-cap companies in different industries.
On the other hand, if you’re in mutual funds, your investments should be diversified between growth, growth and income, aggressive growth, and international funds. Better yet, choose an index fund with super-low fees instead of managed mutual funds, and you get diversification without the expensive salaries paid to fund managers.
There’s no one right answer for stocks versus mutual funds or index funds. A key consideration is whether your portfolio is large enough that you can properly diversify with individual stocks. If not, stick to mutual or index funds until it is.
8. Do you specialize in certain types of clients? Or require any minimums?
Some financial advisors work only with clients whose accounts fall within a particular range… assets under management of over $500,000, for example. It’s important to be sure your asset level fits in the advisor’s range before you meet. (This will usually be on their website. But you can still ask.)
9. How will our relationship work? When and how will we communicate, and how often?
You’ll want to know that your communication expectations are aligned. Will it be a weekly email… monthly phone call… annual face-to-face? Said another way, how much access will you have to the advisor?
Look for someone who proactively reaches out to you – keeps you updated on your investment performance, notifies you when it’s time to rebalance, and calms your nerves when the market is down.
Not someone who never answers your texts, emails, or calls. That can be a particularly bad sign for other reasons. Shysters tend to go missing when they’re involved in fraud.
10. Why did you lose your last two clients?
Ever interviewed for a job and asked your potential employer, “Why is this position open?” That’s what you want to know here too. Why the last guy or gal quit. It could be a simple answer, or it might be a red flag. Their answer will give you clues.
11. Why did your last two clients hire you?
Their answer here may reveal what sets them apart from other financial advisors. Many financial advisors blend in with the crowd, with little to distinguish them. Find out what makes them unique.
12. What do your clients like most about working with you?
This isn’t primarily about the numbers. It’s about the relationship.
Will you like working with them and their team? If not, you’re not likely to follow their advice. Worse, you might even try to avoid them. Neither is good. You’re paying them to grow your portfolio and help you. So you need to like being with them.
13. How do you define success with your clients?
Financial advisors measure success in various ways:
- Clients reaching goals
- How their client feels about their money or success
- Amount of money they’ve made (or lost) for their clients over a year or a decade… in other words, investment returns.
- Maybe a benchmark, like beating the S&P 500
- And sometimes, it’s their own financial success that they measure!
Beware of benchmarks, like beating the S&P 500. If they’re trying to beat the S&P 500, it’s not likely they’re investing in, say, international stocks. Yet they maybe should be for true diversification. So it creates a bit of a mismatch. Any benchmark should align with their stated investment philosophy.
14. Any conflicts of interest I should know about?
All financial advisors have conflicts of interest. It’s just the nature of the beast. For example, they may charge higher fees for certain services than others, and encourage you to sign up for those.
But some conflicts of interest are worse than others.
If your advisor is not a fiduciary, there may be a significant conflict of interest. They’re looking out for their #1 (themselves) not your #1 (you). Non-fiduciaries commonly push products that offer them a commission, so they earn more.
15. How will you coordinate your financial advice with my tax situation?
Your advisor should take all your needs into account when handling your money. And one of life’s inescapable facts is taxes. Give the advisor a chance to talk about how much you’ll get to keep – after their fees and your taxes.
16. Who is your custodian?
Don’t skip this one. This question is a big deal. A really big deal.
Your advisor should use an independent custodian or brokerage house to hold your investments. This provides a valuable safety check. You can jump online and double-check your balance at any given time, and they know it.
Avoid any financial advisor who acts as their own custodian… à la Bernie Madoff, the infamous rip-off artist who defrauded clients via a multibillion-dollar Ponzi scheme. And he’s not the only one. It happens again and again. One 78-year-old was defrauded of their entire life and retirement savings, and then just about lost his marriage over it. This precaution could’ve spared him that anguish.
Never make any check out or transfer any money directly to an individual financial advisor. In fact, verify, verify, verify… before committing any money into their care. Please don’t become the next victim.
17. Are you able to beat the market for me?
Warren Buffet outperforms the market average over the long haul. Not many people can claim that… especially not with longevity like his.
If you meet any advisor who claims to be able to consistently beat the market, be skeptical. No one should make guarantees like that. And anyone who does may be taking risks you wouldn’t want to take.
This question is a good litmus test for their honesty. The right answer should include some variation on this theme… Past performance is no guarantee of future success.
If they brag about their ability to beat the market or perform any other daring financial stunts, beware. It’s one thing to do that with their own money. You don’t want them doing that with yours.
18. What financial advice do you offer besides straight-up investment advice?
Top investment advisors focus on giving good advice across a range of financial issues, not just stock investments. That includes retirement planning, taxes, estate planning, other types of investments, etc.
19. Do you have any questions for me?
They should ask you about your risk tolerance, your time horizon, and your goals. They’re working for you.
Don’t Be Nervous About Interviewing Financial Advisors
If all this talk of interview questions for financial advisors gets your nerves worked up, don’t let it. Good financial advisors actually expect people to interview them.
You should interview at least three top candidates, just like you would for a hire at work. In fact, tell advisors up front that you’re interviewing several and will not be making an immediate decision. Takes the pressure off you to commit at the first meeting.
The Financial Advisor Personality Litmus Test
If the financial advisor says anything that confuses instead of clarifies, run away. Fast.
Or if they make you feel dumb, run. Fast! It’ll make the relationship a living hell. Life is too short for that.
Ask yourself these verifying questions:
- Do you like them?
- Can you trust them?
- Do you feel comfortable sharing your financial and personal information with them?
- Are they actively listening to you, or just talking at you?
- Can you envision forming a long-term collaborative relationship with them?
- If you’re married, do you both like and trust them?
Here at My Wallet Wisdom, we strive to give you information that’ll grow your assets so you can live life the way you dream it. That’s how financial advice should be done.
Remember also that plenty of folks enjoy financial freedom and a secure retirement as DIY financial planners. It’s not a foregone conclusion that you need a financial advisor to succeed.
We wish you all the best in deciding if you need a financial advisor, and choosing one who will work for you long term.