Five Things to Ask Your Financial Advisor

Financial Advisor

Image courtesy Sigma Investment Counselors

The decision to hire a financial advisor is not one to be taken lightly. After all, this person will be handling your financial future; you want to be sure you hire someone you can trust. There are many things you want to keep in mind while choosing your advisor, but here are a few of the most important questions you should ask any potential advisor:

How Are You Compensated?

Know exactly how a financial advisor plans to charge you. A reputable financial advisor will be up front about their fee structure. Some might have an hourly fee, others might charge by the project or based on the amount of assets they manage.

What Are Your Credentials and How Long Have You Been Working?

When looking for a financial advisor, you’ll see lots of names followed by acronyms such as CPA, CFP, and RIA. Ask them to explain exactly what those acronyms mean and what kind of work went into earning those credentials.

What Type of Clients Do You Typically Work With?

Many firms tend to work with a certain type of clientele and you want to be sure the advisor you work with is someone who will understand your unique needs. For example, if you’re a divorced woman looking to build a modest stock portfolio, an advisor who usually works with businesses and corporations isn’t going to be the best fit for you.

Ask for a Sample Financial Plan

There’s no one standard format for financial plans so one advisor might give you a plan that is very straightforward and another might give you a plan that is far more complex and in depth. You don’t want to be getting financial reports you simply do not understand.

Do You Accept Fiduciary Responsibility?

If an advisor accepts fiduciary responsibility, this means they have a legal obligation to solely work in your best interest, not theirs.

For more questions to ask your advisor, the Securities and Exchange Commission (SEC) has a great list of suggestions.