Broker Check

What to Consider When Shopping for an Advisor

How do you find the right financial advisor for you?

With seemingly endless market volatility, more people are looking for their first, or a replacement financial advisor. Here are a few questions you should ask a potential advisor to determine if he or she is the right fit for you.

  1. How much experience do you have?
    Seek help from someone who has at least five years experience in the business, preferably much more.

  2. How many clients do you have?
    You should know if you’d be one of 50 or 500 clients.

  3. What services do you provide?
    Is the advisor’s practice limited to investment management? Or, can he or she provide estate, cash flow planning, retirement, or other important services?

  4. What distinguishes you from other advisors?
    The answer can provide insight into the advisor’s strengths, priorities, and values.

  5. Have you had any complaints lodged or disciplinary action taken against you?
    You should confirm this by checking the web sites of the Financial Industry Regulatory Authority, the Central Registration Depository, the Department of Banking, or the Securities and Exchange Commission.

  6. Can you provide the names of three clients who left you in the last five years?
    Any advisor can find satisfied clients for references. You can learn more from those who left the firm. Every advisor has some turnover. If the clients left because of extenuating circumstances, but were satisfied with the service, you are probably on to a good advisor.

  7. What was your biggest mistake in the last five years?
    Be wary of the advisor who says he or she did not make any. We all make mistakes. Admitting to them is one mark of an honest advisor.

  8. How do you get paid?
    Advisors can get paid through commissions or fees. In the latter case, the advisor charges a percentage of assets under management and/or an hourly or flat fee for time. Be comfortable with the way your advisor is paid.

  9. Do you use proprietary products?
    An advisor who works for a company that offers its own investment products may receive a financial incentive to use them. This may influence his or her choice of investments in which to put your money.

  10. What are your professional credentials?
    Anyone can call him or herself a financial advisor. Look for one who has completed a national education program in financial planning and earned designations such as Certified Financial Planner (CFP), Personal Financial Specialist (PFS), Chartered Financial Consultant (ChFC), or Chartered Financial Analyst (CFA). In addition to passing a standardized exam, such individuals are required to maintain their status with continuing education courses.

    Bogus designations, especially those geared toward seniors, are a red flag.

  11. How do you educate clients?
    Does the advisor provide educational workshops or conference calls to their clients? What book would he or she recommend for learning about finances?

  12. Does the advisor articulate a clear investment and wealth-building philosophy?
    You need to match up. By understanding your advisor’s beliefs, you can determine if you are compatible. Also, ask how do you determine the level of risk in a portfolio? How often do you rebalance the portfolio and using what criteria?

These questions are just a guide. Asking them will help improve your chances of finding the right advisor for you.