Personal Finance: How to Interview a Financial Advisor
Years ago, a financial advisor once asked me, “How was money treated when you were growing up?” The question stunned me because we’d just said hello to each other, and this question was the equivalent of someone going from shaking my hand to meeting my parents without courtship in between.
The financial advisor sat there, in silence, and waited for me to respond. I squirmed in my seat but tried to stay cool. After a few minutes of silence, it was obvious that he wasn’t going to move past that question, so I shared my story about how my parents had handled money and how that impacted me. The financial advisor grinned and told me that he liked to start his conversations with prospective clients with that question because it put people off guard, and it signaled to him whether people grow up with or without money. If you’re like me, that last sentence feels very yucky. Unfortunately, I have learned that other people have had similar experiences when meeting with a financial advisor.
Financial advisors are trained to ask their clients personal questions about money. These questions provide valuable insight on how to engage a client during their professional relationship. During my training as a financial advisor, I spent hours studying tactics to engage people about their personal financial situations and some of those tactics made me very uncomfortable. Yet, what I learned is that uncomfortable questions about personal finance may be helpful for the client and the financial advisor when framed appropriately.
Conversely, clients are not trained on which questions they might want or need to ask a financial advisor. What questions might help potential clients feel empowered when meeting with a financial advisor for the first time or when interviewing a replacement for their current financial advisor? Circumstances for meeting with a financial advisor vary. Often a person may reach out to a financial advisor because of a life event. Perhaps a family member has passed away and a person needs to talk about an inheritance, or a person is a few years away from retirement and wants to talk through what they can expect when they reach that milestone. Though the circumstances that bring you and the financial advisor together are important, there are core questions that should be answered. What are these questions and how might you feel empowered to ask them?
The framework of an interview is appropriate for engaging with a financial advisor for the first time. Who is interviewing who? You are interviewing the financial advisor because the power in the relationship rests with you, the potential client, because you're hiring a financial advisor to manage your money on your terms. How does it work? The following are three steps for interviewing a financial advisor:
1. Background check. First, before an interview, research the advisor using FINRA's BrokerCheck (brokercheck.finra.org) or the SEC's Investment Adviser Public Disclosure website (https://adviserinfo.sec.gov/) to confirm their registration and experience. Also, check out the financial advisor’s website. You may find answers to questions you didn’t know you had and be inspired to add questions to your list.
Related Items
Personal Finance: Conquer Debt Anxiety and Take Control
Personal Finance: Something to Talk About
2. Interview time! Consider asking empowering questions like these during the interview:
What is the financial advisor’s approach toward financial planning and investing?
How do you develop a financial plan for your clients?
What is your investment philosophy? (e.g., growth, value, risk tolerance)
How do you handle market volatility?
How do you stay current on industry trends and regulations?
What is your investment process for selecting assets?
How often do you review and update a client's financial plan?
How is the financial advisor compensated?
How are you compensated? (e.g., fee-only, commission-based, assets under management)
For fee-based advisors: What is your typical fee structure?
Are there any additional fees I should be aware of? (e.g., transaction fees, custodial fees)
Are you a fiduciary? (This means they are legally obligated to act in your best interest)
Are you incentivized to recommend specific products to me?
What makes up the financial advisor’s experience and qualifications?
What are your qualifications and experience? (e.g., licenses, certifications, years of experience)
What types of clients do you typically work with?
Do you have experience with clients in situations like mine? (e.g., inheritance, retirement planning, small business ownership, etc.)
What does a relationship with the financial advisor look like in practice?
How do you communicate with your clients? (e.g., frequency, preferred methods)
What is your approach to client communication during market downturns?
What is your process for beginning the advisor-client relationship?
Will I work with you directly or your assistant?
What is your process for terminating the advisor-client relationship
3. Post interview follow-up. After you interview the financial advisor, consider the follow-up. Is there a follow-up to your interview via email, text, or phone call thanking you for the opportunity to earn your business? How does the follow-up feel to you?
By approaching financial advisors as an interviewer and asking these empowering questions, you, the potential client, may gain valuable insights into the advisor’s approach, experience, and suitability for your needs. Through asking questions like these, you may have more productive conversations with financial advisors and find one with whom you may feel comfortable and confident in trusting with your financial future.
Looking back, I used to be angry about my experience with that financial advisor. Then I reframed the experience. I realized that, instead of sharing personal details about myself, I could have said, “Interesting question: tell me why asking me that question is important to our meeting today?” If the financial advisor had been persistent in pursuing an answer to his question, I would have thanked him for his time and excused myself from the meeting. Why? There are many good financial advisors available in the marketplace and it is better to move toward getting closer to finding the right one than it is to waste time on someone who is clearly not a good fit. And so it is with you. May these questions help you find the financial advisor who is right for you.
Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC. Wendolyn is a fee-only financial planner and member of the National Association of Personal Financial Advisors (NAPFA). For more information, please visit her website at www.wtf-asn.com.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the US, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
This material is provided as a courtesy and for educational purposes only. Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. Consult your own legal or tax professional for information concerning your individual situation.
