The questions below are intended to give you a good sense of the background, business structure, advisory style, and qualifications of a prospective advisor or planner:
1. What are your professional qualifications and designations, including formal educational degrees?
An advisor who has earned one or more professional designations has demonstrated a commitment to education and professionalism, and at least a reasonable proficiency in his or her field. Some common professional financial designations include: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and Chartered Financial Consultant (ChFC).
Just as you might inquire about a potential employee's formal education, knowing where an advisor went to school and what they studied can help indicate their level of general intelligence, knowledge, and ability to problem solve.
2. How long have you been an advisor, how many clients do you have, and how much money do you manage?
This information will help you evaluate an advisor's level of experience and relative success. You may want to avoid an advisor with too little experience, or one who has too few or too many clients. In general, successful advisors will have more clients in assets under management than less successful ones.
3. Who are your ideal clients?
It can be helpful to understand the types of clients an advisor feels are a good fit for their practice. You don't want to be an unusual client; it is better to fit well within an advisor's client base so that you benefit from the advisor's experience with others like you.
4. How are you compensated?
Financial advisors are compensated in a variety of ways. It is important that you understand exactly how and advisor benefits financially from the advice he or she will be giving you. You may decide that you prefer one method of compensation over another, due to personal preference, potential conflicts of interest, or other reasons.
5. Who will be handling my account?
Some advisory firms assign teams of professionals and backup staff to work with clients. Smaller firms usually have just one advisor working with each client. There can be benefits and drawbacks to both models, and it is important that you understand the potential relationship so you can make a decision that you feel will be best for you.
6. How will you communicate with me and my other advisors?
It is important that you receive frequent, clear, and accurate communications from your advisor, and that they will work well with your other advisors (such as your accountant and attorney). You should also feel confident that your advisor will be available for you promptly should you have a question, or want to meet to discuss something.
7. What services do you provide?
Some advisors only offer asset management services while others will offer a more complete set of services that may include personal financial planning. You want to be sure you know exactly what services you are going to get and how they will be delivered before you become a client.
8. What is your investment and financial planning philosophy?
There are a variety of different investment philosophies and approaches to financial planning. It is important that your advisor's way of managing money is consistent with your own. This is an essential area of said for a successful long-term relationship.
9. Do you take custody of client assets?
Safety of your assets is imperative, so most independent advisors use a third-party custodian firm, such as Charles Schwab, TD Waterhouse, Vanguard, or Fidelity. Advisors who are registered representatives will likely custody your assets at the brokerage firm with which they are affiliated. Beware of advisors who don't use an outside custodian.
10. What makes you different from others?
A good advisor should be able to clearly explain to you how working with them is uniquely different from working with someone else. This question gives your advisor a chance to identify their strengths, thus giving you the opportunity to make an assessment.
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