When choosing a financial advisor, finding the right fit is important—especially if they’ll be offering guidance on things like saving for retirement, tax management, and meeting major financial goals.
Your best chance at finding a financial advisor you can trust involves gathering important information before agreeing to work together. If you’re exploring working with a financial planner for retirement, having a candid, confident conversation can help you make sure you’re getting your needs met and there won’t be any surprises.
Here are 5 important questions to ask your potential financial advisor during the vetting process.
5 Key Questions to Ask Before Choosing a Financial Advisor
Are You a Fiduciary All Day, Every Day?
When deciding how to pick a financial advisor, this is arguably the most important question you can ask. The fiduciary standard for financial advisors is the highest level of ethical standards in the industry. Being a fiduciary means an advisor is legally obligated to put your best interest first. A fiduciary must avoid conflict of interest and cannot sell you a financial product in return for a commission.
Because many advisors are “dually registered” it’s important to ask whether they’re a fiduciary 100% of the time. Believe it or not, an advisor who is dually registered is not required to act as a fiduciary 24/7. That means they may also act as a “broker” “dealer” or “registered representative” selling you a product for a commission, when it’s convenient. Pretty sneaky, huh?
At Wealth Legacy Institute you don’t have to worry—all our wealth management advisors act as fiduciaries, all the time.
How Do You Get Paid?
Financial advisors use a variety of fee structures, with two of the most common being fee-only and fee-based. They sound similar, but there’s a key difference in how they get paid.
Fee-only advisors often charge a flat rate, an hourly rate, or a percentage of assets under management (typically 1% of the portfolio value per year) directly to the client. They don’t get additional commissions for selling products. Fiduciary financial advisors work strictly on a fee-only basis.
In contrast, a fee-based financial advisor receives payment from you (the client) but also via other potential sources, such as commissions from providers of financial products. This payment structure raises the risk that your “trusted” advisor could try to sell you something for which they get a kickback.
Before choosing a financial advisor, make sure you understand the total cost to work with them, including their fee structure. You’ll also want to ask about transaction fees, quarterly management fees, advice fees, percentages, expense ratios, etc. to understand your all-in costs.
What Are Your Credentials as a Financial Advisor?
People in the business of helping others invest and plan for retirement can have many monikers. They may call themselves a financial planner, financial advisor, wealth manager, investment broker, financial consultant, or something else completely. However, none of these titles tell you about their education and experience.
That’s why it’s super important to understand how much training an individual has as a financial professional. So, ask them point blank—what experience do you have and what are your credentials?
CFP stands for Certified Financial Planner, and it’s one of the top credentials a financial advisor can possess. CFP certification requires years of higher-level education, practical experience, and rigorous testing. And it’s no coincidence that Certified Financial Planners are also required to uphold the fiduciary standard.
What’s Your Investment Process?
A good financial advisor doesn’t make decisions willy nilly—they should have a consistent process in place that serves as a roadmap for building smart portfolios.
Before picking a financial advisor to handle your retirement planning and wealth management, ask about their investment philosophy or investment process. This informs how an advisor will approach your retirement investment portfolio, affecting everything from how they manage investments, choose an asset allocation, and how they would handle rough patches in the market.
You should also ask how a financial advisor would work with you to understand and analyze your specific situation, and how they arrive at their recommendations.
What is your Specialty and What Sets You Apart from Other Financial Advisors?
Financial planning is a complex process involving more than just investing. Some advisors may focus on specific areas of expertise or niches. A Wealth Legacy Institute, for example, we specialize in holistic retirement planning for the “accidental millionaire”. That means we serve clients who:
- Are ready to think outside the box to build a vibrant and fulfilling retirement
- Want guidance as they navigate the (lifestyle and financial) transition to retirement
- Have $1 million or more in liquid assets
When you work with us, you can be sure we take time to learn about your goals and your financial situation before explaining how we can help you.
Find an advisor who puts your needs first. Here’s how to find a fiduciary. (Download the Guide)