Finding the right wealth advisor — especially one that can address your unique financial goals and design a road map to meet them — can be a time-consuming endeavor. Thankfully, if you know the right questions to ask a prospective wealth advisor, it can help take some of the guesswork out of finding a good fit.
In this article, I’ve outlined nine questions to ask a prospective wealth advisor to ensure you find someone you can trust who is knowledgeable and can grow with you throughout the many stages of your life.
1. What types of clients do you typically work with? You want to work with an advisor who has experience helping people like you. So be sure to dig into what type of clients the advisor works with and what issues they help those clients resolve. This ensures the advisor has the proper client experience to meet your needs.
2. What would our first year together look like? This question is especially important for individuals who have always managed their own investments and may have never worked with a wealth advisor before. It helps to set the right expectation about what first-year communication and accomplishments will be.
3. How frequently will we be in communication? After many of the common planning items are tackled in the first year, it’s typical to meet in person at least once per year (if not more often) with a wealth advisor. Asking this question helps set your ideal meeting frequency if you’re wanting to meet less or more often.
4. Do you use your own proprietary financial planning software or software developed by a third party? Advisors are not in the technology business, and it’s common for advisors to leverage third-party financial planning software. If the advisor uses their own software, it’s not a bad thing, but be sure to dig into whether it’s robust enough to handle the comprehensiveness of your needs. Security can also be an issue with homegrown solutions.
5. What is the average expense ratio (percent) of the underlying funds used in your client portfolios? There are few better predictors of future investment success than how low you keep your investment fees.
6. How are you compensated? There’s likely no more important question to ask a prospective advisor. Advisors can be paid through a fee, like an annual planning fee, a percentage of assets managed, commissions, or some combination of these. Make sure the manner of compensation is fully documented in a written client agreement so that there’s no confusion.
7. Are you held to a fiduciary standard? Surprisingly, not all financial professionals are required by law to act in your best interest at all times. If the advisor acknowledges he or she is held to the fiduciary standard, this should be found in the newly required Form CRS. If yes, keep the conversation going! If not, we would recommend heading for the exit.
8. What credentials do you carry? The gold standard for financial advisors is the Certified Financial Planner designation. To become a Certified Financial Planner professional, advisors must have a bachelor’s degree, complete financial planning coursework, have a minimum of three years of experience, and complete a six- to 10-hour exam.
9. What conflicts of interest (if any) may exist if we were to work together? Conflicts of interest are not bad in and of themselves — it’s pretending they don’t exist that should raise concerns. Having an open dialogue about any and all conflicts that could arise is a critical first step to building trust, and investors can also view an advisor’s Form ADV and CRS to verify information further.
In addition to asking good questions about fees and compensation, there should be room for asking personal questions that will help you get at the heart of the most important question to ask yourself — is this someone I like and trust enough to do business with? If the answer isn’t a resounding “yes!” then you should keep looking. There’s no shortage of qualified and ethical people out there who would love to help you navigate the financial complexities of your life.
Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.
