Ten Questions to Ask when Interviewing a Financial Advisor

Before you ever talk to an advisor, there are a few things that you need to do to prepare. We'll get to the "Ten Questions" very quickly but first, take these four steps:

1. List your top three to five financial goals in order of priority.
2. Assign a time frame to each goal.
3. Calculate the amount of money that you have available to apply to each goal.

Example: After all bills are paid, you have $500.00 each month. You have three financial goals and would like to apply $250.00 to the first, $150.00 to the second and $100.00 to the third.

4. Understand the differences between different types of advisors, full service discount, fee based, and advice only planners. Decide which type of advisor suits your needs and then you can start interviewing.

As someone that has worked in the brokerage industry for more than a decade, my take on the “Ten Questions”, is a little different than most. In fact, they’re not all questions and hopefully they offer unique insight into the personality of an advisor.

Here they are:

1. "Do you have minimum or maximum account sizes"? Lots of advisors do. Save yourself some time by asking this.

2. Over the years, I’ve observed that advisors’ clients mirror their personalities. My next question/request would be, “Tell me about your favorite and least favorite clients." Their answers will give you a sense of who they are and the type of person they like to work with.

3. Next, I’d ask, “Will you make any money on my account”? The answer here should be, "YES" and it should be an amount or percentage that you’re comfortable with. A good advisor is a great asset and if they don’t make money, they won’t be in business for long.

4. I’d also ask, “Will I make any money on my account”? We all want the answer here to be yes. But there are few guarantees in the investment world. An honest advisor will tell you that and come up with a plan to capitalize on market gains and protect you from market losses while minimizing expenses.

5. So that you’ll know what to expect you should ask, “How often will you call me"? An organized advisor will have a regimen but the best answer here is probably, “Whenever there’s something that we need to discuss." Ideally you and your advisor will talk at least once a year to review your goals and circumstances but you should talk more during times of transition. You should also be calling your advisor. The best client/advisor relationships have two proactive participants.

6. A good follow up to number five is, “Why will you be calling me?" This one is a little tricky but if I had a nickel for every time I’ve heard, “My advisor only calls when he or she has something to sell.”, I’d be retired instead of writing this. Ask the question and listen closely to the answer.

7. There are a million things that an advisor can do to earn a living so to gain insight into how the advisor conducts their business, ask, “What’s a typical work day like for you?"Each person would like to hear a different answer to this question, but I’d like to hear, "I come in and review accounts, keeping an eye on gains, losses, asset allocation, goals and investment strategies. I have lunch, meet with two to three clients and go home." I like the system because it’s simple, organized, shows a balanced life and is mindful of client goals.

8. Next I'd ask "How does your account performance compare to the market?" Good advisors will tell you (truthfully) that there’s no one size fits all approach and that performance varies from account to account. But they should also be able to give you at least two examples of clients like you and how they’ve faired. Generally, the brokerage industry does not measure advisor vs. market performance so you’ll need to get this answer yourself.

9. You should also ask, "How much longer do you plan to work in the industry?" You’ll need to know this if you’re interested in a long term relationship.

10. My favorite question is, "What is the most important service that you provide for your clients?" It will tell you what the advisor brings to the table and you’ll know if it’s what you need.