Questions to ask financial advisors before you hire them

When it comes to investing, some people are capable of being the do-it-yourselfer while others need the help of a financial advisor.  Finding the right financial advisor to work with has become just as challenging as trying to pick the right investment.  There are more advisors than ever and their roles are not always clear.

Interviewing financial advisors

I meet a lot of people that go out and interview one financial advisor and then their decision is either yes or no.  The best thing you can do is give yourself choice by interviewing more than one financial advisor.  Not all financial advisors are created equal so you have to learn to interview them.   Here’s a bunch of questions to help you determine the right advisor to hire.

Questions about the advisor

  1. How long have you been in business?
  2. Do you specialize in anything?
  3. What do you like most about being an advisor?
  4. What educational designations do you have?
  5. What makes you different from all the other advisors that are out there?

Questions about their business

  1. What does your organization look like?
  2. How many clients do you have?
  3. What does your ideal client look like?

Questions about products and services

  1. What are your product biases?
  2. What kinds of products do you sell?
  3. What kinds of products can you not sell?
  4. What services do you provide?
  5. What is your area of expertice?
  6. Do you do financial/retirement plans?

Questions about investing

  1. What is your investment philosophy?
  2. What do you do for investment research?
  3. How do you choose investments to buy?
  4. When do you sell investments and why?  What is your sell strategy?
  5. How often do you trade? and why?
  6. What is your track record?
  7. Do you have an example of a model portfolio?
  8. How do you measure or judge performance?
  9. Do you use performance benchmarks?
  10. How do you measure risk?
  11. How do you define risk?
  12. What measures do you use to evaluate risk?
  13. What is your position on taxation of investments?
  14. Will I have an investment plan?
  15. What will that plan entail?
  16. What is the process I will have to go through?
  17. Do you use investment policy statements?

Questions about compensation and service

  1. How do you get paid?
  2. What fees do you charge?
  3. What total fees will I have to pay directly or indirectly?
  4. How often will you report back to me?
  5. What is your preferred method of communication?
  6. What is your service proposition?
  7. How often will my portfolio be reviewed?
  8. Do you have client references?
  9. Ask them to explain a concept to you?
  • when is the best time to invest?
  • what is the best way to save money on tax?
  • can you explain the difference between RRSPs and TFSAs?

Developing an interview process

There are a lot of questions here and you may not want to ask all of them or it may be a half day meeting.  Pick some questions that are important to you and type them out in a format where you can take notes.  Take this document into the interview and let the advisor know you have some questions and take notes as the advisor answers them.  As soon as you are done the meeting, take a moment in private to rate how the advisor did with each of the questions.  I like to use a scale of 1 to 10.  It’s important to do this right away when you get to your car because everything will still be fresh in your head.

Once you have interviewed 2 or 3 advisors, you can now uses these documents to compare them.  Here’s three most important questions of all:

  • Can you see developing a long term relationship with this advisor?
  • Do you trust this advisor?
  • Can this advisor fulfill your financial needs over the next 5 to 10 years?

Can you think of other questions that are important to ask financial advisors before you hire them?

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

63 Responses to Questions to ask financial advisors before you hire them

  1. Great Post. Hopefully, you’ll have a long (and profitable) relationship with your financial advisor. Aside from asking the all important questions detailed in this post, it’s important to have a rapport with your advisor as well. No small feat to find someone qualified AND personable but if you do, you’re more likely to stay together for the long haul.

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  2. Thanks for the comments Elizabeth and Anna. It’s important to put in that effort to finding the right advisor.

  3. I know it’s traditional to say “great post,” but I honestly think this is a terrible post. And I mean that in a sincerely respectful way. It’s well written and comprehensive, but I think there’s a flaw.

    A person should sit down with a potential advisor for 20-30 minutes. Do they talk about themselves or do they ask about you? Keep a tally of the number of times they say “I” vs “you”, if it helps. Personally, I would choose the advisor who wants to understand me before giving any advice. That’s not to say all the things you mentioned aren’t important; some of them really are (experience and products/licences being two examples). But if you work with an advisor who has one approach for everyone, the creative problem solving you’re paying for might never materialize.

    Interviewing an advisor by asking questions about them won’t tell you whether or not they have your interest front and centre. Giving them 20-30 minutes to conduct their initial meeting should. Then pull out your most important questions, being respectful of your time and theirs. It shouldn’t take all day to sense whether or not you can work together.

    • Robert, I think that’s a great perspective. I think it’s important to want an advisor that cares about you and want’s to know more about you. Often people do not want to say too much without getting to know someone else first and the only way to do that is to ask questions. I think there should be a balance. Some advisors say an initial meeting is for the advisor and the client to interview each other. I think it’s important for people to feel comfortable asking questions and sometimes tough questions that need answers before you can work with them. Trust is built on communication and common values. how would you know that if you never asked questions.

  4. I agree that there should be awareness before hiring a financial advisor but there are flaws in this post to as I think certain details are necessary but not all rather than I would choose an advisor who wants to understand me and my needs before giving me any advice.

  5. I meet many people go out and interview a financial advisor, and then their decision is yes or no. The best thing you can do is give you more choices by interviewing a financial advisor.
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  6. I agree with this, using financial advisor can be a good investment rather than direct hiring for any personnel. AT least you will be secured on this.I have it really helps us a lot when having an investment advisor because it can suggest and let us be aware on how to properly use our money. thank you guys for posting this one.

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  13. These are all great questions to ask if you are looking for a financial advisor. But I must say that you can do probably just as well going with a traditional and reputable mutual fund company that invests in a index fund (i.e. Vanguard, TRowe, Fidelity, etc.).

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