A professional financial advisor can assist you with many issues surrounding your investment, retirement, and estate plan. Just a few meetings with a financial advisor may help you rest easier about your financial plan. It’s important to update your financial plan on a continuing basis and working with a financial planner who monitors things for you can make this job a lot easier.

It’s not always easy to find a financial advisor that you feel you can trust. To make sure that you are choosing a quality financial firm and financial advisor, you should ask these questions:

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Personal Questions

  • How old are you? Although asking the age of someone may be deemed rude, it’s important for someone who is in need of financial advising. Through their age, you’ll be able to learn if they’ve been through difficult economic times and if you are older, you may want a financial advisor who is younger than you so you know it’s more likely they’ll be around as you age and need them more and more.
  • What’s your educational and certification background? You’ll likely want a financial advisor who has the proper certification background, such as someone who is a Certified Financial Planner™ professional (CFP®) or a Chartered Financial Consultant® (ChFC®). It’s also helpful to work with some one with an educational background in finance – like an MBA or a Finance degree.
  • How long have you been a financial advisor? As with any career, experience is a worthy attribute, especially in the financial world. You’ll want some one with experience in all markets, good and bad.
  • Do you accept fiduciary responsibility? Fiduciary responsibility is a legal term meaning the financial advisor you choose (or their company) has a fundamental obligation to put your best interest first, not theirs.
  • Have you or your financial company ever been sued or reported for legal actions? It’s always good practice to do your due diligence about who you’ll be working with.
  • What’s the largest, smallest and average portfolio you manage? Different advisors have different specialties. You must learn if the financial advisor you have contacted is suitable for you, your income and your financial needs.
  • Could you give me references of three clients? References are important when choosing a financial advisor. Speaking to an advisors current clients will give you a feel for their level of service and competence. Importantly, this can also highlight an advisors strengths and weaknesses.

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Financial Firm Questions

  • Would you describe your firm? Although this should be a question that’s asked to every financial planning company, it’s often forgotten. Take the time to get to know the financial firm you wish to use and ask the financial advisor to describe it. You’ll want to know how many associates work there, if it’s a stand-alone firm or one that’s part of a larger company, the amount of money they control, and who will be able to help you if your financial advisor isn’t available at the moment-in-time you need them.
  • What services do you perform? There are plenty of financial services available to you, but it’s imperative you know the exact financial services your potential advisor can provide you. Are they comprehensive financial advisors? Helping with investment, retirement and estate planning?
  • Do you use other firms or professionals to assist you, such as an accountant, broker or estate attorney? If so, who are they? You’ll need and should want to know who the other individuals are who may be assisting you and your financial needs in the future. If there are other professionals/firms, be sure to ask them the same personal questions from above too.
  • Do you partner with other investment firms? Many advisors place trades and custody assets through larger third-party firms like Charles Schwab, Fidelity, and others.

Fees and Costs Questions

  • Do you offer different levels of service, and how much do you charge for each? For most individuals, fee-only advisors are usually best. It’s crucial you learn how you will be charged for the services you wish to use and how much for each service. Doing so will help you when considering your investments and more.
  • What are the fees for typical bond and stock funds? The answer to this question is important, especially if you’re interested in stocks and bonds. The fees are highly dependent on if the advisor takes commissions or not.

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Investment Questions

  • Do you factor my risk tolerance into my financial plan? It’s important to have an investment plan that considers not only your goals and time horizon, but also the level of risk you’re comfortable taking.
  • What factors do you consider when deciding how to allocate capital? Younger people can be more tolerant of risk, while older people may be less so. But it’s not as simple as just age, there are a variety of individual factors that need to be considered for your financial plan.
  • Do you include real estate in my investment allocation? Many people already have a significant amount of their net worth invested in real estate through the ownership of their primary residence. So, purchasing additional real estate investments may be overkill.
  • Do you consider all of my income sources when creating my financial plan? It’s important to consider not just the income from your investment portfolio, but from other sources such as a pension, social security, or rental real estate income.
  • Do you consider both macro and micro economic factors when creating an investment plan? A good investment advisor hones in on individual companies as well as understanding the overall market environment.
  • What kinds of assets do you invest in? Find out if it’s the traditional investment assets of stocks and bonds, or if other assets are considered such as commodities or alternatives.
  • Are you an active or passive investment manager? There are different schools of thought to the effectiveness of each strategy, and some advisors end up right in the middle, partially active, partially passive.

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Planning Questions

  • How often do you provide me with an up-to-date forecast and evaluate my situation? Express to the potential advisor what time-frame would make you comfortable.
  • Do you plan for many different contingencies throughout my retirement? The death of a spouse, real estate purchase, or other events can mean a significant financial change.
  • Do you factor changes to the cost of living into your financial planning? Inflation can eat away at one’s retirement. It’s important to consider this factor.
  • Do you factor in taxes into my investment plan? Taxes on bond interest and stock dividends and capital gains are important considerations in your financial plan.

Last Question

  • This is a question you should ask yourself – what qualities am I looking for in my financial advisor? Once you have the answer, compare that to the person you’re interviewing.

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