10 Questions You Should Ask A Financial Advisor Before Hiring One!
Presented by Irvine based Financial Advisor JP Geisbauer CPA, CFP® of Centerpoint Financial Management.
***Transcript***
(Edited for grammar and clarity.)
10 Questions You Should Ask a Financial Advisor Before Choosing One
Choosing the right financial advisor might be one of the most important decisions you make regarding your financial future—and it can also be one of the most stressful. How do you know if you're making the right choice? In a world full of smooth talkers and flashy promises, it's easy to get swayed by the wrong factors.
Before you start working with a financial advisor, you need to ask them the right questions. In this blog post, I'll share ten questions you should ask any potential financial advisor to ensure they're the right fit for you. These aren't your typical questions—these are the ones that will uncover whether your potential financial advisor will truly act in your best interest. After asking these questions and evaluating the answers, you'll feel confident in choosing an advisor who aligns with your goals, values, and needs.
1. Ask Your Financial Advisor If They Are a Fiduciary
A fiduciary is legally obligated to act in your best interest at all times. This is crucial for receiving unbiased advice and avoiding conflicts of interest from selling certain financial products.
There's another standard called the "suitability" standard, which only requires an advisor to justify selling you a product that may not necessarily be in your best interest. Make sure the advisor you choose is a fiduciary and will always put your needs first.
2. Ask Your Financial Advisor About Their Qualifications and Certifications
The term "financial advisor" can be broad and vague. Look for advisors with certifications like CFP® (Certified Financial Planner™), CFA® (Chartered Financial Analyst®), and CPA (Certified Public Accountant). These certifications indicate that the advisor has the knowledge and expertise to manage your finances, and they also require continuing education to stay current on industry trends. Be sure to understand any other designations they have and how these qualifications can help you with your particular financial situation.
3. Inquire About Your Financial Advisor’s Experience
Years in the industry don't always equate to experience in financial planning. Ask about their experience working with clients in your specific niche. For instance, do they specialize in retirees, business owners, or high-net-worth individuals? Asking detailed questions about your situation will give you a sense of their experience and how well they can help you.
4. Understand Your Financial Advisor’s Fee Model.
Financial advisors generally make money in one of two ways: commissions or fees.
Commission-based advisors typically earn money by selling insurance, annuities, mutual funds, or other financial products. This can create a potential conflict of interest, as they may prioritize selling products over providing advice that is in your best interest.
Fee-based advisors charge fees based on assets under management, hourly rates, or a flat fee for specific services. This approach typically has fewer conflicts of interest, as the advisor is focused on maintaining a long-term relationship with you.
Ensure you understand how your advisor is compensated and whether it aligns with your financial goals.
5. Ask Your Financial Advisor About The Type Of Services They Offer
Some advisors specialize in investment management, while others offer comprehensive financial planning, which includes retirement, cash flow, tax, and estate planning. Make sure the services they offer align with your expectations and needs.
6. Understand Who Your Financial Advisor Typically Works With
Choose a financial adviser who has experience working with clients like you. For example, if you're nearing retirement, you want someone who understands the complexities of that life stage. Ask the advisor about their typical clients to ensure you're in their target demographic. If you have specific needs, this is a great time to ask questions and gauge their knowledge.
7. As Your Financial Advisor How Often You Can Expect To Meet With Them
Regular meetings are critical to staying on track with your financial goals. Ask how frequently you'll meet with your advisor—quarterly, biannually, or annually—and if they'll be available between meetings for questions or emergencies.
8. Inquire About The Type Of Technology Tools Your Financial Advisor Will Provide
In today's digital age, modern technology tools can make managing your finances easier. Ask your potential advisor about their financial planning software, online portals, and portfolio review tools. For example, if you are interested in robust financial planning software, ask for a demonstration to see how it will be used to improve your overall financial picture.
9. Ask If You Will Be Working With The Financial Advisor You Are Speaking With Or Someone Else In The Firm
It's important to know if you'll work directly with the advisor you meet or if you'll be passed off to someone else in the firm. If you're assigned to another team member, ensure they're part of the introductory process and that you're comfortable with them.
10. Understand The Financial Advisor’s Investment Philosophy
One of the most revealing questions you can ask is, "Will you beat the market?" If the advisor says yes, this could be a red flag. A good advisor will focus on creating a portfolio tailored to your goals and risk tolerance rather than chasing market returns. Ensure their investment philosophy aligns with your long-term objectives and risk tolerance without exposing you to unnecessary risks.
If you're looking for more insight into building a great retirement plan, check out my other video What Makes A Great Retirement Plan.
Thanks for reading, and I hope this helps you make a confident decision!
About the presenter:
JP Geisbauer is a Certified Public Accountant, a Certified Financial Planner ®, and the founder of Centerpoint Financial Management, LLC, a financial planning, investment management, and income tax planning firm located in Irvine, CA. JP Geisbauer is dedicated to helping California-based business owners and executives transition into retirement. He has been quoted in many news outlets including Forbes, Newsweek, US News & World Report, MarketWatch, YahooFinance, CNN and NerdWallet.
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Disclaimer:
This article is for general information and educational purposes only. Nothing contained in this article constitutes individual financial, investment, tax, or legal advice. Before taking any action on any topic discussed in this article, consult with your own financial planner, investment advisor, tax professional, and/or attorney for advice on your specific situation.