If you are looking for a financial advisor (and if you are we hope you aren’t one of our clients), you may find yourself drawn more to the sales pitches of the advisors you should avoid, than to the sincere words of a potentially great advisor. Here’s five questions you might want to ask to help sort that out.
“Can you tell me about your personal life?” Huh? Who cares about that? You should. One objective here is to throw them off of a potential sales track and into an area that they aren’t used to talking about in these types of meetings. Also, and more importantly, their personal life will likely be a reflection of their values. Ideally, you are looking for an advisor who thinks the important things in life are the same things you hold dear.
“How do you make money?” This is different than “how do you get paid” which generally leads to a discussion of fee for service vs. commission. For advisors who only deal in one product or service – like investments – the answer shouldn’t be too complicated. For advisors who cover a range of products and services, like financial planning, insurance, investments, and more, the answer may take more time. There’s no absolute right and wrong with respect to how advisors make money – but you should be looking for an answer that makes sense to you, from someone who appears to be quite comfortable discussing this topic.
“Can you tell me about your staff?” While there are advisors who do it all, I’m going to suggest that’s not likely who you are looking for. With most good advisors, you will likely spend more time dealing with other people in the office than you will with the advisor herself. Best to find out who these people are, how long they’ve been around, and what their qualifications are before signing up.
“What is your succession plan?” A good advisor relationship should last a long time – ideally, in fact, a lifetime. That seems doubtful unless the advisor is quite a bit younger than you, and remains in the capacity of advisor throughout. So, when your advisor retires, or if some tragedy suddenly takes your advisor out of the picture, what happens to you? Good question. Ask.
“Can you show me a sample of a financial plan?” Alright, this is going to stack the deck towards advisors who, like us, are financial planners. I truly don’t see how any advisor can give advice without the backdrop of a financial plan. If you disagree, then skip this question. If you do agree, ask to see a plan. Their version of a financial plan may in fact just be a tool to sell you something. Check it out. And make sure that CFP (Certified Financial Planner) is among their credentials.