Are you looking for a new financial advisor? Here are some important questions to ask when interviewing for a new advisor:
1. What is your background / how long have you been in this business / what registrations, licenses, credentials and/or certifications do you have?
FINRA is the financial industry’s regulatory body and you can check prospective advisors’ backgrounds using BrokerCheck at the FINRA website, but asking in person, “Do you have anything in your regulatory record that I should know about?” may be insightful. Here is a link to FINRA’s Broker Check page: http://brokercheck.finra.org/Search/Search
The FINRA Broker Check will display their registrations, but not the Financial Advisor’s other credentials, licenses or certifications.
Many industry designations are available to advisors. Ask prospective advisors about their registrations and certifications to determine if they are qualified to provide the types of services you are looking for. For instance, if you are concerned about retirement planning, you may want to find an advisor who has a Retirement Income Certified Professional® (RICP®) designation from The American College of Financial Services, among other designations.
Many prospects had different careers prior to becoming a financial advisor. In addition to learning about current qualifications, learning about all their experience can provide a more complete picture. Years of industry experience do matter however. We suggest you look for someone with 10 or more years in the industry, or someone on a team with an advisor that has more than 10 years of industry experience.
2. How are you compensated / what are your fees?
It is important to understand how your advisor is compensated. Do they work on commission, strictly fee-based, or a combination of those two? Not all advisors and companies charge the same commissions or fees for the same services. Be sure to compare costs for the type of investments and service you are looking for. If your advisor is fee based only, be sure to ask if the initial consultation is free. Initial consultations can take up to two hours and, we believe, should be free of charge.
3. How will my account be handled and who will provide the various services I will need?
Will your new advisor meet with you as often as you would like? Do you want to have quarterly, semi-annual or annual portfolio reviews in addition to occasional telephone discussions? Who is responsible to stay connected? Who is the advisor’s assistant? Is there more than one assistant? Are they on a team? Who covers for the advisor when he/she is out of the office? These are all relevant questions you should have answers to in order to feel good about your choice of an advisor.
4. What do you need to know about me in order for us to work together?
To fully understand your financial picture, goals and risk tolerances, your new advisor should know a lot about you. A good advisor will want to assess if your current investments match your risk tolerances. When interviewing a prospective advisor expect that they may ask some personal questions about you to see if you will also fit their practice.
5. What types of clients do you work with / what is your investment philosophy?
As mentioned above, established advisors will want to assess whether or not you fit into their practice too. Advisors can have distinctly different investment styles and philosophies. Check their website for a statement of investment philosophy, or ask when you meet to make sure that your investment styles and philosophies are a good match.
6. Do you offer investment plans and can I see a sample?
Some advisors create an investment plan for you that will assess where you are in working toward your financial goals, however, not all plans are the same. If your prospective advisor offers an investment plan, ask to see a sample. Looking at a sample plan will help you compare the level of analysis you will receive.
7. Who will be the custodian of my funds and securities?
This question is particularly important when interviewing advisors who do not work at large brokerage firms. Ask independent consultants if they use a third party custodian or clearing firm to hold your assets. You want to feel good about the company that custodian’s your account.
8. What other services do you offer?
In addition to stocks, bonds, mutual funds and annuities, some advisors and companies offer a wide range of products and services including alternative investments, liability management, and long-term care and other insurance products. If you think you may have a need for any of these other products and services in the future, this may play an important role in your decision of who to choose as your new financial advisor.