How to Choose the Right Financial Advisor for You

For many of us, figuring out the best way to manage our money is intimidating and involves a learning curve. There are so many choices for financial products, savings accounts, insurance options, and more, that it’s hard to know what is right for us and our goals. This is where a financial advisor can be helpful. A financial advisor helps you think about your financial goals and strategize the best ways to meet them. 

The problem is, there are lots of bad financial advisors out there that care more about their paycheck than your financial wellbeing. Making this even more difficult, regulations for financial advisors are somewhat lax. An advisor may say they have your best interest in mind, but do they really?

In today’s post, I’ll go over how to assess whether a financial advisor is right for you. I’ll also provide a comprehensive list of interview questions you can use as you compare professionals. By the end, I hope you’ll feel more confident about finding (and getting!) the help you want and need.

A Good Financial Advisor Understands and Prioritizes Your Goals and Financial Context

As my favorite podcaster, Joe Saul-Sehy says in the podcast Stacking Benjamins, a good financial advisor leads with process, not product. That means that the role of a financial advisor is to help you think through your financial plans. They then strategize the best way to make those plans work. After understanding your goals, a good financial advisor can then recommend financial products that might be a good fit. However, the right person should not lead with financial products before understanding your goals and background.

Consequently, the first thing you should look for is a financial advisor that works with you to create a comprehensive financial plan based on your goals, specific needs, and current financial situation. A good financial advisor can help you with tax planning, wealth management, insurance decisions, and financial advice around investments. You might not need or want all of these services. However, they will be able to offer their potential clients the opportunity to strategize in these areas.

If, instead, your prospective financial advisor tries to sell you on a product before understanding your financial situation, run the other way. Especially if that product is whole life insurance or some other sketchy product that’s only helpful in very specific situations.

A Good Financial Advisor Listens and Cares

Additionally, good financial planners will often have key soft skills. They’ll generally be effective listeners and have communication and problem-solving skills. Consequently, when you meet with a prospective financial advisor, you should feel listened to and heard. These skills are vital for them advising on a financial plan that’s right for you. 

Moreover, establishing effective communication between you and your financial advisor is key for the success of your relationship. Consequently, you’ll want to determine whether the advisor’s communication style, responsiveness, and accessibility works for you. If you have trouble communicating in an initial interview, it doesn’t bode well for getting into tougher conversations about money.

A Good Financial Advisor Makes Time

On a more basic level, make sure you will meet often enough and in a format that works for you. Towards that end, ask how frequently they recommend meeting. Also ask whether you will meet face-to-face, over the phone, email, Zoom, etc. Then determine whether that frequency and format works for you and your needs.

Additionally, ask whether they’re available outside of regular meetings for questions or concerns that pop up. Ideally, they’ll prioritize your needs and peace of mind if a difficult situation arises like unusual market volatility or life transitions. They should hopefully offer an avenue for you to air those concerns and for them to respond.

It’s hard to evaluate soft skills in a single meeting. You might therefore ask for testimonials from other clients to get a better sense of their interpersonal skills.

Finally, you should like your financial advisor. If you dread spending time with them, you will not make it a priority to meet. That can undo the benefit of having an advisor in the first place. You don’t need to be best friends with them. However, you should like them enough to feel like you can spend time and share important information with them.

Qualifications and Credentials

You’ll also want to assess your financial advisor’s qualifications and credentials. Look for financial advisors with recognized certifications like Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or Chartered Financial Consultant (ChFC). 

These certifications are important because they indicate that the advisor has received education in their field, is engaged in ongoing training, and has a commitment to upholding ethical standards in their profession, including acting in your best interest. 

Unfortunately, it’s not enough to ask some one if they are a CFP, CFA, or ChFC as there have been cases of people lying about their certifications. Instead, check their credentials through the Certified Financial Planner Board of Standards or the CFA Institute. These organizations will indicate if your advisor has legitimate credentials and if they’re up-to-date.  

You might also ask whether they had a previous role and, if so, where. Doing so helps give you a sense of their longevity in the field. Additionally, ask how they keep up with industry developments. You don’t want someone who is recommending the same old products they would have recommended 10 or 20 years ago because they are too lazy to understand new developments in their field.

Fiduciary Duty

One of the most critical aspects to consider when selecting a financial advisor is whether they operate under a fiduciary standard. Advisors who adhere to this standard are legally obligated to act in their clients’ best interests at all times. This means placing the client’s needs ahead of their own and avoiding conflicts of interest.

Clarify how the advisor is compensated to ensure transparency and mitigate potential conflicts. Fee-only advisors charge clients directly for their services, while fee-based advisors may receive commissions from product sales in addition to client fees.

Choosing a fiduciary advisor is key for making sure that they have your best interest in mind. That being said, some people claim to be a fiduciary when they are not. The standards for monitoring fiduciary responsibilities are somewhat lax. This is where you should ask about fiduciary duty, but also check against other information like how they are compensated, feedback from other customers, and the extent to which they push you to particular products vs. try to understand your unique situation.

Specialization and Expertise

Financial planning is a broad field encompassing various specialties, from retirement planning and investment management to tax optimization and estate planning. When evaluating potential advisors, consider whether they have expertise in the specific areas relevant to your financial goals and priorities. 

Moreover, assess the advisor’s track record and success stories, particularly with clients who share similar financial profiles or objectives. For example, you may not want to work with someone who focuses on high-net-worth individuals if that does not describe you. Client testimonials, case studies, or portfolio examples can help you assess whether your prospective financial advisor has the experience to help you.

Investment Philosophy and Approach

Similarly, you’ll want to ask about your advisor’s investment philosophy. This includes things like how your financial advisor manages risk, particularly depending on a client’s risk tolerance. It also includes how they think about maximizing returns, how they think about a client’s time horizon when evaluating options, and how they navigate market fluctuations. All of these things will give you a sense of their investment philosophy and whether it aligns with your own goals.

Indeed, one of the most fundamental aspects of a financial advisor’s role is to develop and implement an investment strategy that aligns with their client’s goals and financial situation. Their choice of financial products for you will depend on their investment philosophy as it applies to your situation. 

For example, if you have a long time horizon, you’ll likely want a strategy that strongly emphasizes diversified stocks. ETFs are a particularly good option for many people that involve low fees and taxes and high diversification. If instead they prioritize bonds, mutual funds (which tend to have higher fees and no better performance), or unconventional investment products, you might do a bit of research to figure out if they truly have your best interests in mind.

Regulatory Compliance and Disciplinary History

Last, make sure the financial advisor doesn’t have a history of bad behavior. You can check the SEC’s Investment Adviser Public Disclosure (IAPD) database or FINRA’s BrokerCheck to review the advisor’s background and credentials. These resources will highlight if an advisor has past disciplinary actions, regulatory sanctions, or customer complaints against them or their firm.

In some cases, isolated complaints may be the result of unique situations that do not reflect on the advisor’s quality. You’ll likely still want to ask them about those situations and assess whether their explanations are sufficient to put your mind at ease. However, patterns of misconduct or negligence are red flags that you’ll definitely want to follow up on.

Interview Questions for Financial Advisors

That’s a lot to keep track of. To make things easier, I’ve compiled a list of interview questions you can use to guide your discussions with potential financial advisors. Asking the right questions can help you discern a strong candidate from someone who isn’t likely to meet your needs. You can also download the printable PDF included at the end of this post for easy access during your hiring process.

List of Interview Questions

• What specific qualifications and credentials do you have as a financial advisor? How do they help you serve your clients effectively?
• Are you held to a fiduciary standard? Can you explain how you prioritize your clients’ best interests in your practice?
• Can you provide examples of clients with similar financial goals or challenges to mine whom you’ve helped in the past? How did those past experiences go and what recommendations did you make to them?
• How do you approach investment planning and asset allocation, and how does your strategy align with my risk tolerance and long-term objectives?
• What is your fee structure? Do you charge a flat fee, subscription fee, or a percentage of returns? 
• Do you have any potential conflicts of interest that might affect your recommendations?
• How frequently do you communicate with clients? Do you prefer to have a face-to-face meeting or meet remotely? And am I able to contact you outside of our scheduled meetings if I have important questions that come up?
• Can you walk me through your client onboarding process and how you tailor your services to meet the unique needs and preferences of a new client?
• What is your investment philosophy, and how do you adapt it to changing financial markets and client circumstances?
• How do you stay informed about current trends, regulatory changes, and best practices in financial planning and investment management?
• Can you provide references or client testimonials, and may I contact them for additional insights into their experiences working with you?

Printable Questions to Ask Your Financial Advisor

Below I’ve provided a printable PDF that you can print out and take to meetings with prospective advisors. I’ve also included space to write down their answers. Feel free to jot other questions you’d like to ask on these sheets!

Final Thoughts on Choosing the Right Financial Advisor

Choosing the right financial advisor is a big decision that can impact your financial well-being now and in the future. You’ll also interact with this person regularly. Consequently, the ideal candidate is someone you like and trust, as well as someone who is qualified and informed.

By carefully considering factors such as qualifications, fiduciary duty, specialization, investment philosophy, communication, and regulatory compliance, you can narrow down your options and identify advisors who align with your values and objectives. 

Plus, our comprehensive list of interview questions can help empower you to find someone who fits your needs and feel confident that you’ve picked the right person for you and your finances.

I hope you enjoyed this article. If you did, please consider liking, subscribing, or sharing with others. It’s always a huge help! Interested in related content? Check out my posts on saving for multiple goals, my intro to investing, and what to do when interest rates go down, among so many other articles in the Personal Finance section of this blog!