Marin Community Foundation
7 Questions
Advice

7 questions to ask when interviewing a financial adviser

Originally published by MarketWatch [link] on November 29, 2016

Interviewing a financial advisor can be one of the most frightening tasks for an individual or couple. They have to gather everything confidential about themselves and get "financially naked" in front of a stranger. All the while having countless questions swirling in their mind ranging from: Did I save enough? Will I run out of money? Have I invested too risky or too conservative? Will I have enough to pay for long-term-care costs? What's a 403(b) anyway? 

Finding the right advisor can be more intense than a trip to the dentist. However, it doesn't have to be. This experience should be an educational exploration, to build an essential relationship with a financial "coach" that may last the rest of your life. I typically encourage prospective clients shopping for an advisor to be bold and ask the hard questions.

Here are seven questions that can be very revealing:

  • Who do you specialize in working with? Do they work with anyone who can fog a mirror? If so, that's not very comforting. Do they work with families with a wide range of net worth? If so, how will they relate to your financial goals? Are they familiar with the planning intricacies of your profession or business?
  • Do you have a financial plan? My favorite question. "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway" —Warren Buffet. After spending countless trade association cocktail hours conversing with my fellow advisers, it is my opinion that most clients would not want to trade places with their financial adviser. So, what do financial advisers invest in? If they are recommending products they don't personally own, I would want to know why. The other reason to ask this question is to see if they actually have their own plan. Where is their detailed plan? Each individual has their own unique financial goals, risk tolerance and needs, and so a financial advisor's plan would obviously be customized to him or her; but if they don't have a copy of their plan readily available, I would be concerned. Beware of professional product pushers disguised as financial advisers.
  • Who will I be working with? What happens if something happens to you? My clients tell me they pick their doctors young for a reason. They go on to tell me this because they understand younger doctors may be more up to date with current trends or cutting edge technologies and by probability will most likely outlive them. Not all great advisors are young, and they don't stay young, so make sure you're not going to be immediately passed off to some junior associate. Also, confirm you know their succession plan if something unexpectedly happens to them.
  • Are you independent or captive? Would you go to a Chevy dealership and expect to be recommended a Ford? Of course not, that's why you may want to consider working with a fiduciary, as they are legally bound to offer "best advice" by taking into account the needs of each individual client, and someone that has access to a variety of financial products and companies.
  • How often do you contact and communicate with your clients? Do they send out correspondence throughout the year, such as newsletters, etc.? Are they proactive? How many times do they contact their clients in a year? Does the client have to call to schedule reviews or seek recommendations?
  • Share with me how you will work alongside my attorney and CPA? Synergy with other professionals is essential when creating a true holistic financial strategy. If they don't effectively detail how they build a plan in conjunction with these professionals, I would be concerned with how they are going to operate effectively.
  • What are your fees? Don't give up after hearing the response: "We charge 1%." Is that the only fee you will pay? Are there additional trading costs or other fees you should be aware of?

At first glance, these questions look intense. Here's what's really at stake: If you pick the wrong financial advisor, you stand to lose more than just the possibility of good returns. You could lose something far more important: Time. Working with the wrong type of advisor could unwind months or even years of saving and potentially delay a retirement spent with family and friends. Working with a financial advisor who is focused not only on growing your assets, but also preserving and distributing them in an efficient manner, can play an integral part in determining whether or not you are on track for the retirement you desire.

As an investment adviser representative and insurance professional, I don't mind being asked any of these questions and neither should your future financial advisor.