financial advisor questions

4 Questions to Ask A Financial Advisor In First Meeting

As a former financial advisor and financial writer, I am asked by people how to find a good financial advisor or hear about an investor making bad investments. Finding a competent financial advisor can be challenging for many investors because there are many options for people now from online Robo advisors to traditional financial advisors/stock brokers.

A recent Northwestern Mutual study reported that adults who work with a stockbroker or financial advisor said “substantially greater financial security, confidence, and clarity than those who go it alone.” The actual value of working with a financial advisor will vary by person. It should be noted that advisors are legally prohibited from promising returns. However, research suggests that financial advisors add an average additional 1.5% to 4% more return per year.

Before I go any further, I think it is best to answer the question, should investors use a financial advisor? My short answer is YES. However, many people could use a Robo advisor like M1 Finance and set up an investment plan without even meeting with a traditional financial advisor.

Comparing financial advisors can be challenging because they are often not a way to compare them apples to apples. Sometimes it is best to talk to a CPA or independent third party. You can also research online and compare brokers and financial advisors.

There are many red flags of bad financial advisors. Some include offering guarantees or are associated with radio show hosts.  Most reputable financial advisors are not associated with any radio host. Radio show hosts may sound entertaining, but shouldn’t be your source for investing. Professional financial advisors are typically not on the radio and are forbidden from saying any investment product return is guaranteed.  Another red flag is insurance agents that try to appear to be financial advisors.  If the financial advisor is not regulated by FINRA or SEC – run away fast. Here are a few questions to ask.

How is the financial advisor compensated or paid?

When I started as a stockbroker, most brokers charged a ticket charge or were paid a commission on products such as mutual funds or annuities. It is widespread now to charge you a flat fee or “fee-only” a percentage of your assets under management. Some advisors are paid commissions by insurance products, a severe red flag. If the advisor earns more by ignoring your best interests, do not hire them.

Is the advisor a fiduciary?

A fiduciary is a person who is ethically bound to act in another person’s best interest. It eliminates conflict of interest concerns and makes a financial advisor’s advice more trustworthy. One of the red flags in choosing a financial advisor is one that is pushing their company’s investment products.

What is the financial advisor’s strategy or specialty?

Many financial advisors specialize in a specific specialty. Some work with business owners, others may work with teachers or retired people. You must understand your financial advisor’s strengths and weaknesses. If you prefer to go all-in on stocks, an advisor that prefers bonds and index funds is not an excellent match for your style.

What are the financial advisor’s professional credentials?

Financial advisors are required to pass exams, and it is very reasonable to ask your advisor about their licenses and credentials. Some of the exams include Series 7, Series 66, and Series 65. Many advisors go a step further and get more credentials such as Certified Financial Planner or CFP.


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