When hiring a financial advisor, it’s clear that you want to make the best decision for you and your money—but deciding who to work with may not always be clear.
On the one hand, your financial health is one of the most critical aspects of your life. On the other hand, hiring the wrong financial advisor could cost you missed opportunities, poor recommendations, and costly fees.
To complicate things even further, there can be a big difference in the types of services that financial advisors offer their clients. For example, some advisors provide comprehensive financial planning and advice for a fee, while others solely sell insurance products for a commission.
While there is nothing wrong with insurance providers, the challenge is to try and discern who is truly providing comprehensive financial advice and who is just offering insurance products.
The title of the people doesn’t help much. In these scenarios, their titles could both be “financial advisor,” but they offer two very different services and hold themselves out as financial advisors. That’s why it’s essential to ask the right questions when interviewing a potential financial advisor.
5 questions to ask before hiring a financial advisor
To help you out, here are five key questions to ask when interviewing a potential financial advisor. With these in mind, you’ll be on your way to finding the right person for the job.
1. How long have you worked as a financial advisor?
When hiring a financial advisor, one of the most important questions to ask is how long they have been in the business and what certifications they hold.
Years of experience and industry knowledge give financial advisors the tools to provide sound advice and competent guidance for their clients. A financial advisor who has been practicing for decades has been exposed to various markets and situations, allowing them to draw from years of hands-on knowledge and problem-solving expertise.
An experienced and certified financial advisor is critical for anyone looking for reliable counsel when making important financial decisions.
2. What is your experience with investment planning and portfolio management?
When hiring a financial advisor, it’s essential to establish their experience and level of expertise regarding investment planning and portfolio management.
While investments aren’t the only part of a comprehensive financial plan, they can be critical to growing your wealth over the long run. Therefore, a good financial advisor should have expertise in investment planning, portfolio management, and portfolio design.
Ask your potential advisor about their qualifications and specific certifications regarding investments. It’s also important to check how long they’ve managed client assets. Finally, understand their process of creating a portfolio tailored to individual needs, including any advice or expertise provided along the way.
Industry certifications are also a critical marker to determine a baseline of financial expertise for your advisor. Look for the CERTIFIED FINANCIAL PLANNER™ or CFP® certification—the gold standard in the financial planning industry. This ensures that your advisor has met rigorous education, training, and ethical standards during their time as a financial advisor.
By understanding their different methods, you can ensure their approach aligns with your personal goals and expectations.
3. What is your investment philosophy or style of investing?
When seeking a financial advisor to help you reach your financial goals, it’s essential to understand their investing strategy.
Before you hire a financial advisor, ask them about their investment philosophy—do they prefer value or growth investing? Passive or active management? Do they believe in jumping in and out of the market or buying and holding for the long run? What criteria are they using to evaluate where to invest your money?
Knowing the investment style and strategies a financial advisor may utilize can help you decide if they’re right for you. So, ask this question when interviewing potential advisors and select the one most compatible with your investment preferences.
4. What are the fees associated with your services, and how are you paid (commission, hourly, etc.)?
When selecting the right financial advisor, asking questions about the fees associated with their services is essential.
A reputable financial advisor will be upfront and honest about how they are paid—whether that is hourly, commission for any products or services purchased, or retainer fees.
Knowing how much you can expect to pay up-front and ongoing will help you plan accordingly as well as gain an understanding of what type of services you may be entitled to, such as ongoing advice tailored to your needs.
Before engaging with a financial advisor for hire, ensure their fees are discussed in detail so there are no surprises down the road. Generally, when it comes to fees, advisors fall into one of three categories:
Fee-only
Fee-only advisors charge their clients for the services they provide. This is a favorable alignment of incentives as the advisor works directly for and is paid directly by the client.
Fee-based
Fee-based advisors earn their fees using a combination of fees charged to the client and commissions earned from selling certain financial products.
Commission-based
Commission-based advisors earn all their fees by selling financial products and receiving a commission from a third party. This can create strong incentives for the advisor to sell whatever product generates the highest commission and make unnecessary moves with investments even if they aren’t necessarily best for the client.
5. Are you a fiduciary at all times?
Lastly, and most importantly, ask your advisor if they are fiduciary at all times.
A fiduciary advisor must act in your best interest when giving financial advice. And while you may think that all advisors should be a fiduciaries at all times, unfortunately, that’s not the case. Therefore, you must ask whether your advisor is held to a fiduciary standard at all times and don’t be afraid to get that in writing.
Fortunately, if you are working with CFP® professionals, you can rest assured that they are fiduciary at all times. Their Fiduciary Duty is part of the Code of Ethics and Standard of Conduct they must adhere to.
Tencap Wealth Coaching is here to help
Ultimately, these five questions should give you a good idea of the advisor’s qualifications, experience, and investment philosophy. It will also help you understand how they charge for their services and whether they are fiduciary at all times. This can help you decide if they’re the right fit for you.
If you’re interested in working with a financial planning professional to ensure your financial success, then Tencap Wealth Coaching is here to help.
At Tencap Wealth Coaching, we’re focused on helping you achieve your financial goals and more through academically sound financial planning. From investment management to retirement planning and tax strategies, we are here to manage the complexities of your money and allow you to relax and enjoy life. Learn more or schedule an introductory meeting below.
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Greg Black, CFP®, ChFC®
Greg Black is the owner and founder of Tencap Wealth Coaching, an independent investment advisory firm founded on academic investing principles. As a Certified Financial Planner, Greg takes an educational approach to helping his clients be settled and responsible with their financial circumstances. Greg specializes in helping his clients create a proactive plan to minimize the exposure of market conditions while still harnessing the incredible power of global financial markets.
Greg specializes in "complexity" and is skilled at turning a complicated situation into an organized strategy for the families he serves. Greg, and each advisor of Tencap, is a stated fiduciary. You never have to wonder if your best interest is being served. Greg has been transforming the investor experience since 2012.
