In the complex world of wealth management, asking the right questions can transform your financial future. Whether you have built your fortune through entrepreneurship, inherited family wealth, or excelled in your career, the relationship with your financial advisor is crucial for preserving and growing your assets.
We hope you find the questions below to be a helpful tool in selecting the best financial advisor for your needs. The relationship with your financial advisor should be one of transparency and trust. These questions are not just information-gathering tools — they are conversation starters that reveal your advisor’s thought process, values, and ability to address your unique financial goals.
Fundamental Questions to Ask Your Financial Advisor
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“Can you help me with what I need?”
Identify the specific areas in which you would like assistance (e.g., portfolio management, financial or retirement planning, tax planning, estate planning, loan repayments, etc.). You want to ensure the advisor has experience or specialization in these areas.
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“Who do you work with?”
Know the core client demographic they serve. Are they familiar with the goals and concerns of people in similar situations to yours?
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“Do you have any violations or client complaints?”
Check BrokerCheck or Investor.gov for any reported incidents.
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“How exactly are you compensated? What are all the fees that I am paying for your services?”
- Advisors are typically compensated in one of the following ways: 1) through commissions on investment products, 2) a flat fee for their services, 3) a percentage of Assets Under Management (AUM), 4) an hourly rate for services, or 5) a combination of any of these methods.
- Make sure the advisor clearly articulates their compensation to you in easy-to-understand language. If you are not clear about anything, ask them until you are clear.
- Ensure that their total compensation or fees are fair and reasonable for the services they provide by comparing them to industry benchmarks.
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“Are you bound by the Fiduciary Standard?”
As opposed to the Suitability Standard, the Fiduciary Standard was established as part of the Investment Advisers Act of 1940 (that’s right, it’s a law), stating that a fiduciary financial advisor must put their client’s interest above their own. They must follow the very best course of action, regardless of how it affects them personally or their income.
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“Tell me about your professional network.”
It is helpful for financial advisors to have a network of experienced professionals, such as estate attorneys, lawyers, tax preparers, and insurance brokers, to whom they can refer clients if needed. Ask them how their network was developed and why they selected those particular individuals.
Advanced Assessment for High-Net-Worth Investors:
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Ask them hard questions, including:
- “Tell me a time when you were unable to meet a client’s needs.”
- “Has a client left you before? What was the reason?”
- “What are some ways you think you can improve?”
- “What is a critique that a competitor could credibly say about you?”
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Assess investment experience, investment philosophy, and investment decision-making:
- “How do you believe you will add value to my investment strategy?” Listen for responses that include tax loss harvesting, active management, “holding the client’s hand” in a downturn, sticking to an investment plan, picking appropriate funds, etc.
- “What is the due diligence process for fund selection and rebalancing?”
- “How would you construct portfolios for two vastly different clients?”
- “How do you manage your own money, and is that different from how you manage your clients’ money? If so, why?”
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Assess tax knowledge:
All advisors should have at least a basic understanding of the tax code and the general principles of taxation. Questions to ask:
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- “What proactive tax planning and forecasting do you do, if any?”
- “How are taxes considered (and minimized) in the investment management process?”
- “With permission, will you coordinate with my CPA on tax-related matters?”
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Assess transparency:
- Do they clearly display and/or reference all investment fees to clients, including not just their management fee but also those from custodians, third-party investment managers, mutual funds, and other sources?
- Do they show how taxes affect the investment returns?
- How thoroughly do they disclose information to clients?
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Assess communication skills:
A financial advisor can become more valuable in times of distress or significant change. It is important to determine that you communicate well together before something like this occurs.
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- Do they speak to you in layman’s terms, or do they use complicated financial jargon?
- What is the communication cadence with your financial advisor? Will you have to reach out to them, will they reach out to you, or will it be a combination of both?
- Do they sufficiently educate, or are you left with more questions than answers after reviewing your portfolio?
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Assess their technical competence and continuing education:
- If they have some of the better-known designations such as CFP, CPA, CFA, and CPWA, it can indicate their technical competence. However, knowledge obtained from designations alone can become stale, especially if it was obtained many years or decades ago.
- What continuing education are they required to take to maintain their designation or credentials?
- What designations, certifications, or credentials do they currently hold and/or plan to pursue next to improve their skill and knowledge base?
Advisors should welcome these questions, seeing them as opportunities to deepen your relationship and demonstrate their comprehensive approach. Remember that wealth management goes beyond investment performance. It encompasses tax strategy, risk management, estate planning, multi-generational wealth transfer, asset protection, and understanding of your deepest values. By utilizing this list of questions to assess financial advisors, you are taking an important step toward ensuring your wealth serves its purpose for you and future generations.
If you would like more information about our services, please visit our website. Introductory meetings are educational in nature; while no fee is charged, they may include a discussion of the Firm’s advisory services. Schedule time with one of our advisors here to learn how Greenspring Advisors might be able to help you.
