11 Questions to Ask a Financial Advisor

by R. Mark Shepherd, Founder & CEO

Here are 11 important questions to be sure to ask when considering hiring a financial advisor:

  1. Are you a fiduciary? A fiduciary has a legal obligation to act in the best interest of their clients. Non-fiduciaries simply make “suitable” product recommendations which is a lower ethical standard of service.
  2. How do you make money? Seek firms with simple, transparent, fee-only structures. Be sure to understand if there are additional transactions or commissions that you would be paying for investments. Finally, ask about the underlying costs of investment funds or products utilized by the advisor. These expenses can eat into investor returns over the long-term.
  3. What services do you provide beyond financial planning and investment management? Does the advisor and his/her team have the capabilities to provide more complex services over time as your life progresses? Ask about things such as insurance planning, business consulting, wealth transfer strategies, and family planning. All of these value-added services can make a big difference over time. 
  4. Will I be working only with you or with a team? Having a team-based service approach can help increase the client experience, and increase responsiveness for all of your client service needs.
  5. What makes your client experience unique? How will this advisor differentiate your experience in the pursuit of achieving your long-term financial goals?
  6. What is your financial planning process, and can I see a sample financial plan? Your advisor should have a defined financial planning process that they implement for clients. Further, seeing a sample financial plan can help you visualize your experience and understand the depth of the work-product you will be receiving.
  7. How much contact do you have with clients, and do you have a written service agreement? Your advisor should set clear expectations with you on what your communication and meeting plan will be. This will give you an idea of whether the advisor’s approach is high-touch, or more hands-off. Further, asking for a written Service-Level-Agreement will show that the advisor has their service model formalized.
  8. What is your investment approach? Process is one of the most important components of long-term investment success. You should seek to understand how the advisor will invest your assets, what vehicles they use, and who is watching your investments on a daily basis. Further, you should look for an advisor that invests based on the goals of your financial plan. 
  9. How do you use technology for my benefit? Today’s investor expects a digital experience. Similarly, advisors are leveraging technology to help enhance their offering to clients. Ask for examples of how advisors use technology to assist in the financial planning, investing, and services processes.  
  10. How do you help me with taxes? While most financial advisors do not prepare tax returns, you should understand how they incorporate your tax situation and strategy into their planning and investing. You should seek financial advisors that are tax-aware because inefficient tax strategies in both financial planning and investing can eat into your long-term returns.
  11. Who is your custodian and what will my reporting experience look like? The custodian is the entity that holds your assets and reports on their values to you. Look for an advisor who uses an independent custodian to hold your investments and provide your account statements and tax reporting. Beware advisors who act as their own custodian as this could be a sign of fraud – as seen in the infamous example of Bernie Madoff.

Disclosures

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Shepherd Financial Partners, LLC a registered investment advisor and separate entity from LPL Financial.

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