15 Questions to Ask a Financial Advisor

By Brett R. Pernicano on October 29, 2020

The federal regulation that was intended to protect retirement investors from dubious financial advice is in jeopardy. In June 2020, the Department of Labor (DOL) issued a reproposal of the long-debated fiduciary rule that was years in the making. As of the fall of 2020, this revised version is still being debated.

The purpose of the rule is to require financial professionals to act in the best interest of their clients. While that might seem like something that isn’t necessary to legislate, several financial consultants such as brokers, insurance agents, and others in the financial industry are not held to such a standard. They can recommend investments that promote their employer’s financial bottom line and are not held to the highest level of care under the fiduciary duty which legally requires the interests of their clients to be put first.

An investment adviser or financial planner who prioritizes your goals will help you make the appropriate financial decisions when it comes to most investing opportunities. To ensure that you are getting  advice tailored to your needs instead of being sold a product, it’s important that you know which questions to ask a financial advisor. By having an in-depth conversation with your future financial professionals, you’ll be able to see if your financial goals align with your current assets, investment mix, and spending habits. Remember, you don’t have to know how to create a financial plan; a financial advisor will walk you throughout the entire financial planning process. Whether you’re looking for guidance on developing an investment strategy or need help with estate planning, your potential advisor should be able to confidently talk to you about their services before working on your financial future.

Knowing what to ask a financial advisor beforehand not only ensures you find an advisor who puts your interests first, it can allow you to have a more productive conversation.  When creating a financial plan, you want to make sure that your financial planner is on the same page as you and clearly knows all of your financial goals. When talking to a potential financial advisor, discuss your financial future in-depth so there is a clear path forward.

Finding a financial advisor you can trust can be hard. With that being said, knowing exactly what questions to ask your financial advisor can be tricky. At Dowling & Yahnke Wealth Advisors, we want to help you prepare for your financial future as much as we can. That’s why we’ve created this guide to suggest key questions for your financial team.

Regardless of what happens to the DOL’s fiduciary rule, you need to ask questions to boost the chances that a financial professional will always act in your best interest. Asking questions can also increase the chances that you’ll find an advisor who will be an excellent fit for your needs.

Here are 15 questions to ask a financial advisor:

  1. Are you a fiduciary? In other words, are you required by regulation to put your clients’ interests ahead of those of your firm and its employees?
  2. How do you charge for your services? Are you a fee-only advisor (only charging a fee as a percentage of assets under management)? That’s almost always preferable because it is more transparent regarding what the client is paying for advice. Or are you compensated by commissions or a combination of fees and commissions (fee-based)? Do you charge performance based fees?
  3. In addition to what I pay you, what other costs will I have to absorb?
  4. If you aren’t a fee-only advisor, are you eligible for bonuses for your work? How can you earn them? Are there any other compensation arrangements which might create a conflict of interest between your interests and mine?
  5. Does your company offer contests for selling investment products?
  6. Do you specialize in certain types of clients?
  7. How do you develop your investment recommendations?
  8. How would you describe your investment philosophy?
  9. Will you be creating an Investment Policy Statement (IPS) for me? (An IPS contains an investor’s financial goals as well as the plan on how to reach them. The document is essential for long-term investors.)
  10. What is the average portfolio size that you handle? Do you have any account minimums?
  11. What specific services do you provide?
  12. How often will we have meetings?
  13. What custodians, broker dealers, and mutual fund providers, such as Vanguard, Schwab or Fidelity, do you use in your practice?
  14. Have you or the firm ever been disciplined for illegal or unethical behavior?
  15. Can you give me three client references?

From investment management to retirement planning to tax planning, a potential advisor will be able to explain all aspects of financial planning. Regardless of what happens to the DOL’s fiduciary rule, you need to ask questions to boost the chances that a financial professional will always act in your best interest. Asking the right questions for a financial advisor can also increase the chances that you’ll find an advisor who will be an excellent fit for your needs.

Still don’t know what to ask your financial advisor? Our team of experts can help! For more tips on financial planning, asset allocation, retirement planning, or investment advice, contact our advisors at D&Y Wealth Advisors today.

To see how D&Y answers these questions, read here.


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