Attempting to find a financial advisor who is knowledgeable, trustworthy, and within your price range can be challenging and time-consuming. This often leaves people seeking advice feeling discouraged about the process or questioning whether there is an advisor out there who will meet their needs.

Asking the right questions can help you quickly assess whether a particular financial advisor is right for you and compare the various advisors you are considering. Below are five questions to ask about any financial advisor you are considering.

 1. What services does the firm provide, and does this align with what I am looking for?

When seeking a new financial advisor, it is helpful to determine why you are looking for a financial advisor in the first place. Financial advisors have different service offerings, so understanding what you are looking for and screening financial advisors for those specific services can save you a lot of time.

Imagine you are just looking for someone to take over investing your accounts. Then, you may not want to work with a firm offering (and charging for) comprehensive financial planning. If you are looking for someone to provide advice on all aspects of your financial life, you want to make sure you are not looking at companies that only provide advice on a narrow topic like education planning but someone that does offer more comprehensive services. 

The point here is to make sure you are clear about what you are looking for and screen out financial advisors that would not suit that need. Information about a firm’s service offerings is usually found on their website, but if you cannot find the answers you are looking for there, ask them in an introductory call or by submitting an inquiry. Keep in mind that introductory calls should be offered free of charge to prospective clients, and setting up a call does not obligate you to move forward with becoming a client.

2. What are the advisor’s credentials and experience?

Although used often, job titles like financial advisor, wealth advisor, and private wealth officer are unregulated. For this reason, job titles are not a good indicator of a person’s professional credentials or experience. Even understanding an advisor’s credentials does not tell you about that person’s unique experience. So, what should you look for?

First, look for the credentials behind their name. Common advisor credentials are CFP (certified financial planner), CPA (certified public accountant), and CFA (chartered financial analyst). However, this is by no means a comprehensive list of all the financial certifications that a person could have. These credentials provide a clue about the training the advisor has received. If you are unfamiliar with an advisor’s credentials, look them up on the internet to see what the credentials entail, or ask the advisor what designation the letters refer to.

Second, check out the educational background and experience of the advisor. For this information, their company bio or LinkedIn can be very helpful. These sources can help you determine how long a person has been working in financial planning, their experience in the industry, and their educational background. Again, alignment here is essential. If you are going through a divorce and need assistance setting up your financial life post-divorce and organizing your assets for divorce proceedings, finding an advisor specializing in divorce may make sense. You can also find advisors specializing in various professions, such as educators, consultants, small business owners, or doctors. Some advisors even specialize in stages of life, such as young parents or retirees. It is a very exciting time in financial planning because many small firms cater to a variety of clients, so you do not need to settle for an advisor who doesn’t understand your needs or lifestyle.

3. What is their fee structure? Do I feel that I am getting value for their fee?

It is always vital to understand how a financial advisor earns their compensation. There isn’t a standard fee structure for financial advisors, but there are common configurations, such as assets under management, hourly rates, or project-based rates. Advisors may also be compensated with a commission based on the products you sign up for, such as life insurance or annuities. I recommend avoiding fully commission-based advisors as this compensation method incentivizes sales over providing financial advice. However, the most important thing is that the compensation is fully disclosed. It is common for financial advisors to be asked about their compensation, and any advisor who seems to be put off by being questioned about how they are paid is not the advisor for you. Additionally, any advisor who seems to be pushing you toward a product without fully understanding your financial situation is likely commission-based, and their compensation model and the appropriateness of their recommendation should be considered before deciding whether you move forward with the recommendations they provide.

Once you understand how an advisor is paid, ask yourself if you feel comfortable with the value you are getting for the fee. If this is your first time seeking professional financial advice, understanding the cost of such a service can provide a bit of sticker shock. However, as a client, you should feel comfortable with the value you are getting for what you are paying. For example, if you are paying an advisor 1.00% of your assets and they are only investing your money in one index fund, the services provided simply do not match the fee being paid. This can quickly cause discontent with your choice of advisor.

On the flip side of the coin, and perhaps less commonly discussed, I also suggest questioning when an advisor’s fees are too low. If an advisor says they will provide a ton of value like financial planning, investment management, and tax planning for a very low price, like $100 a month, it would be wise to question what else goes into that person’s compensation. There could be a perfectly rational explanation like the company in question is a charity and receives grant funding, but often, it could mean the company is either not financially solvent and will close because it is operating at a loss or they are being paid on commissions and have not fully disclosed their compensation. Additionally, they may not be as engaged with your business when their services do not provide enough income for their own financial well-being.

4. Am I comfortable with how the firm operates?

Although traditional advisory practices filled with businesspeople in suits are still thriving, the Internet has made it easier than ever to work with advisors all over the world. Some of these practices have in-person meetings in their offices, while others are completely virtual, and meetings will be held in virtual conference rooms. Some advisors create financial plans with software in real-time with their clients, while others create financial plans and provide PDFs or hard copies of documents. Financial firms can also vary in size from major corporations like Vanguard to small, boutique firms run by just a few people.

The type of firm that you choose is based on your preferences, and alignment with your preferences, as with so many other aspects of finding a financial advisor, is crucial here. For example, if you feel uncomfortable working with an advisor in Los Angeles when you live in Chicago, focus on finding an advisor in your city. If you prefer working with an advisor with brick-and-mortar offices, choose advisors with that type of setup. If an advisor dressed in a t-shirt and jeans is weird to you, then look for a more traditional practice. When so many options for advisors are available, there can also be pressure to find the “best” one, but the best choice for an advisor will vary by person. The awesome part is that there are so many options to choose from that there is a high likelihood of finding a firm that operates in a way that works for you.

5. Do I trust the advisor and feel comfortable asking questions?

Any advisor that has your best interest at heart should have no problem answering your questions. When meeting with advisors, if you notice hesitance to ask questions or sense an advisor is dismissive of your questions, this is not the advisor for you. An advisor/client relationship is built on trust. You will be talking to this person about an intimate part of your life, often disclosing information about your financial history, dreams for the future, and your family dynamics. Additionally, even though you are the customer hiring an advisor, you may be intimidated by a person who seems to know so much about a topic you may be less knowledgeable and afraid of coming across as dumb or ignorant. However, the right advisor for you will be someone with whom you can comfortably ask questions, express your concerns, or share personal information. 

Defining your needs is the first step a person should take before seeking a financial advisor. Your unique needs and preferences will be the most significant qualifier of whether an advisor is right for you. Once your needs are defined, seek financial advisors who provide aligning offerings, understand your lifestyle, operate in a manner you are comfortable with, and with whom you feel comfortable asking questions. Keep these vital factors in mind during your search and take your time choosing someone who will bring the value and peace of mind that working with a professional can offer.