The Boomerater Report explores questions you should ask when choosing a financial advisor. Here is a question from a Boomerater member: “What are the things to consider when choosing a financial advisor? I don’t have a lot to invest, but want to make sure the investments I do have are safe and positioned to grow. Also, I want to make sure I’m on the right track to maximize my retirement income.”
Here are 10 questions to ask a potential advisor:
1. What experience do you have? Ask the financial advisor about his or her philosophy and previous work experience. The advisor should be able to convey how this relates to his or her practice.
2. What are your qualifications? Anyone can call themselves a financial planner, so be sure and ask what qualifies them to offer financial advice and whether they are recognized as a certified financial planner, a certified public accountant/personal financial specialist, or a chartered financial consultant. Ask about continuing education and how they stay current on changes in the financial planning field.
3. What services do you offer? Find out what services are offered and if they match your needs. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses or give investment advice unless registered with state or federal authorities.
4. What is your approach to financial planning? Most financial planners have a typical type of client and financial situations they like to work with. Some planners offer comprehensive plans, and others work on a project basis or for an hourly rate.
5. Will you be the only person working with me? The financial planner may work with you directly or have others in the office assist. Ask who will be your main contact and who will be working with you.
6. How will I pay for your services? Know the financial planner’s fee model before you engage in their services. The standard fee models are: fee-only, in which all fees are paid by the client with no commissions; commission, in which payments are based on the products sold to you; and salary, in which the planner is paid from commissions you pay the company.
7. How much do you typically charge? The cost will depend on your needs. The estimate could be an hourly rate, flat fee or percentage of commissions. Always ask for an estimate.
8. Could anyone besides me benefit from your recommendations? Be sure and ask about conflicts of interests. Does the planner receive fees based on referrals or do they participate in company incentive programs?
9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? Check for disciplinary actions for CFP practitioners on the CFP website. Be sure they are registered with the state or the U.S. Securities & Exchange Commission. The planner must be able to provide you with a disclosure form called Form ADV Part II or the state equivalent of that form.
10. Can I have it in writing? Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.
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This information was provided by Kimberly J. Howard, CFP. You can find a comprehensive directory of financial advisors in your area by searching Boomerater’s financial advisor directory.