Most people probably spend more time researching which television to buy than which financial advisor to hire.
Think about that.
We compare prices. Read reviews. Watch videos. Study features.
All for something we might own for the next several years.
Yet a relationship with a financial advisor could last 20 or 30 years and potentially influence decisions involving your retirement, investments, taxes, insurance, estate planning, children's education, charitable giving, and your family's financial future.
And how do many people choose that person?
Someone referred me.
I liked them.
They work with people at my company.
There's nothing inherently wrong with any of those reasons. Trust and personal connection matter.
But they probably shouldn't be the entire due diligence process.
If you're considering hiring a financial advisor or evaluating the relationship you already have...here are five questions worth asking.
1. What Is Your Financial Planning Philosophy?
Most people start an advisor interview by asking about investments.
What do you invest in?
How have your portfolios performed?
What's your investment strategy?
Those can be reasonable questions. But I'd start somewhere else:
How do you believe people become financially successful?
The answer can tell you a lot about the advisor you're interviewing.
If the conversation immediately centers on investments, that may tell you their primary focus is investment management.
Again, that's not necessarily good or bad.
The question is whether that's what you are looking for.
Do you want someone primarily focused on managing your portfolio?
Or are you looking for someone who considers your investments alongside cash flow, taxes, insurance, estate planning, retirement, and the other pieces of your financial life?
Before evaluating an advisor's solutions, understand their philosophy.
Because that philosophy will likely influence the recommendations they make for years to come.
2. How Do You Get Paid?
This should not be an uncomfortable question.
There are several ways financial advisors can be compensated.
Some charge a financial planning fee. Some charge a fee based on assets under management. Some receive commissions on certain financial products. Some use a combination of compensation structures.
The purpose of asking isn't necessarily to determine that one method is automatically better than another.
It's about transparency.
You should understand how the advisor gets paid and how that compensation fits into your financial relationship.
Ask questions until you understand:
What am I paying?
What am I receiving for that compensation?
When does the advisor get paid?
How might the compensation change depending on the recommendations implemented?
You shouldn't have to become an expert in financial industry compensation.
But you should understand how the person giving you financial advice is compensated.
3. What Does Your Financial Planning Process Actually Look Like?
Imagine interviewing an advisor and hearing:
“Send me your investment statements and I'll tell you what I recommend.”
Maybe that's exactly what you're looking for.
But if you want comprehensive financial planning, I'd want to understand what happens before recommendations are made.
Ask the advisor:
“Walk me through what it's actually like to become a client.”
Do they have a repeatable process?
How do they learn what you're trying to accomplish?
How many meetings are involved?
Who participates in those meetings?
When are recommendations made?
And what happens after everything is implemented?
This matters because a good financial planning process isn't simply a presentation.
It's an experience.
You should understand where you're going, why you're doing each step, and how the different financial decisions fit together.
Most importantly, your goals should come before the solutions.
4. Who Will Actually Be My Financial Advisor?
This question can easily get overlooked.
The person you meet during the initial conversation may not necessarily be the person handling every aspect of your financial life.
Many financial firms today operate as teams.
I actually believe there can be significant advantages to that structure.
Financial planning can involve investments, insurance, retirement planning, cash flow, taxes, estate planning, and other areas. Having people with different areas of expertise can be valuable.
But you should understand the structure.
Who is my primary advisor?
Who actually gets to know me and my family?
Who handles my investments?
Who helps with insurance?
Who do I contact when I have a question?
Who schedules my meetings?
And who is responsible for making sure all of these pieces work together?
You're not simply hiring an individual.
You're hiring the team and process behind that individual.
Make sure you know what that looks like.
5. How Will We Know If I've Been Successful?
This may be my favorite question.
Ask an advisor:
“How will you know when I've been financially successful?”
Then pay close attention to the answer.
If the response is entirely about beating the market, that tells you something about how they define success.
But is that how you define financial success?
Maybe your definition is being able to retire at 55.
Maybe it's maintaining your lifestyle throughout retirement.
Maybe you want to pay for your children's education.
Maybe you want to leave money to your family.
Maybe you want to give more to organizations you care about.
Maybe you want the freedom to walk away from your career someday.
The answer is going to be different for everyone.
That's precisely the point.
Your financial advisor's definition of success shouldn't be based solely on their scoreboard. It should be based on yours.
Investment returns are part of the equation.
They're not the entire equation.
You're Choosing More Than a Financial Advisor
When you're interviewing advisors, you obviously need to like the person.
You need to trust them.
You're potentially going to have difficult and deeply personal financial conversations with them for decades.
But trust and likability aren't enough.
You're also choosing a philosophy.
You're choosing a compensation structure.
You're choosing a planning process.
You're choosing a team.
And you're choosing how success will ultimately be measured.
Those things matter because the financial world around you will continue to change.
Products will change.
Markets will change.
Tax laws will change.
Your life will change.
But a sound financial planning philosophy should help guide decisions through all of them.
So whether you're interviewing your first financial advisor or wondering whether your current relationship still fits what you're trying to accomplish, don't be afraid to ask harder questions.
Start with these five:
- What is your financial planning philosophy?
- How do you get paid?
- What does your planning process actually look like?
- Who will be my advisor, and who is on my team?
- How will we know if I've been successful?
The answers may tell you far more than a portfolio presentation ever could.
Because ultimately, the goal isn't simply to find someone to manage your money.
It's to find the right people to help you build the financial life you actually want.
This article was inspired by an episode of Built for Life, Not Just Wealth, where I walk through the five questions I would tell my own mother to ask if she were interviewing a financial advisor.
This material is intended for general informational purposes and should not be construed as tax, legal, or investment advice. Individual situations vary, and financial decisions should be coordinated with the appropriate professional advisors.