8 Interview Questions for a Financial Advisor - The Financial Cookbook, LLC (2024)

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Looking to hire a financial advisor? These are the most important interview questions for a financial advisor.

Are you thinking of hiring a financial advisor?

It's definitely a big decision and not one that should be taken lightly.

After all, the decision of who to go with to manage your finances can mean the difference between retiring early with massive wealth or not being able to retire at all. In fact, Nerd Wallet found that a 1% fee can be the difference of $590,,000 at retirement

I don't say that to scare you, but you have to be VERY CAREFUL.

If you're unsure about your investment options, start with my free investing guide which will walk you through investing steps and help you choose whether or not you want a financial advisor.

If you've read through my two cents on the financial services industry and still want to proceed, these are the questions you absolutely need to ask the potential financial advisor, and what you should look for in their responses.

Here are the most important questions to ask a financial advisor before you hire them.

Interview Questions for a Financial Advisor

This is a list of the key questions you should be asking a potential financial advisor as this is the best way to determine if someone will match with your financial strategy.

1. Are you a Fiduciary or Registered Investment Advisor?

This question alone is the MOST important, in my opinion.

You want to find a fiduciary, not a traditional certified financial planner.

A fiduciary is required by the SEC to put their clients' needs above their own needs. They give advice based on what's best for you and are not supposed to receive a commission based on the investments you choose.

They typically require a percentage fee upfront like 1% a year. However, this also means they typically don't take back-end commissions from investments you choose.

They are supposed to give the best financial advice for your portfolio.

How to Check if Your Financial Advisor is a True Fiduciary

To check if your financial advisor is a fiduciary (aka Investment Advisor), I like to use Broker Check.

Enter the advisor's name and check to see if there are any disclosures against them.

Next, check to see what type of advisor they are and what credentials they have.

I personally like to make sure that they are strictly an “Investment Advisor”, not a Broker. You must check closely as many will have both, so it crosses a fine line. You want ones that say “Investment Advisor” only.

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2. Do you receive any 3rd party compensation for recommending particular investments?

This is the next most important question.

The thing is…if they are a true fiduciary, they shouldn't be receiving 3rd party compensation for recommending particular investments.

They may start to get uncomfortable with this question. This is good. They need to be transparent about exactly what they will be charging.

A true fiduciary should be charging a percentage fee or a flat fee, never a commission-based fee.

Make sure that they are very clear on all fees that are going to be charged at all times.

I was in a situation when I was younger where my financial advisor wasn't truthful. When I asked about costs, she would say “Don't worry about it” or “There aren't any”. When I would continue to question, she would say “The costs are on the back end so you never see them and it's not a big deal”.

That's EXACTLY why it IS a big deal.

I want to know all costs and not have hidden costs! Let's just say I took my money away from her account.

I need to trust my potential advisor and this is not the way to do so.

3. How exactly are you compensated? Get this in writing.

You need to thoroughly understand exactly how they are compensated.

Is it a percentage fee, fixed fee, hourly fee, or commission?

I always like to get this in writing and if they refuse, then I won't be going with them.

Be prepared as they are often “vague” about it. In that case, you know exactly what that means and it means you need to run for the hills.

When you truly understand the fees that are charged, it should be fairly simple to decide whether or not you want to move forward with this person.

Make sure you thoroughly understand every fee or hidden charge.

4. What is your investment strategy?

I always like to ask what their investment philosophy is to see if we are on the same page.

For example, you'll want to ask ” What would you recommend for my investment portfolio” or “What are your investment recommendations?”.

The role of a financial advisor is to understand your current financial situation and come up with a strategy built of financial products to accomplish your goals. Therefore, knowing their take on things like asset allocation, their client's risk tolerance, market conditions, individual stocks, mutual funds, and index funds will be crucial.

I want to see if they are going to take into account my age and my goals or just group me in with the rest of their clients.

Example of Investment Philosophy

For example, at my young age (early 30s), I like to see that they want to be aggressive, but in low-cost funds.

If they start pitching me mutual funds, I run for the hills because something is off in terms of goals in maximizing investment decisions.

If they think bonds are a good idea for my age, I also run.

Everyone's strategy will be different so make sure their strategy aligns with your age and your goals.

I also want to understand their diversification strategy, their discipline, and their “bedside manner”. Are they helping you understand everything or are they rushing you through it?

5. What services do you offer beyond financial advising?

Another important question to ask a financial advisor is about services.

Do they offer tax planning, legal services, estate planning, etc?

It's important to find a financial advisor that is a true wealth management partner who not only handles your comprehensive financial plan but watches over the full picture of your financial life.

If they are only handling the investing side of things, how can they possibly produce good results without knowing the rest of your goals?

Try to find a firm that offers other services like estate planning, law services, tax services, etc.

This way everything you do is aligned together.

6. Do you have other clients my age that have my goals?

I also like to ask about their other clients.

I want to know if they work with other people my age who have the same goals for retirement. Do they work with a variety of clients or do they specialize in a particular niche?

If they are used to working with older individuals on their retirement planning, it's probably not a good fit for me.

However, if they typically work with young professionals, that could be a solid potential match.

It's important that they thoroughly understand where I'm at in life so we can grow together.

7. How will we work together?

Ask how they plan to work with new clients like yourself. If you can't get ahold of your financial advisor in a timely manner, it's not going to be a good fit for you.

Think about asking these questions:

• Will they answer your emails within 24 hours?
• Do you only get time with them once a year for 30 minutes?
• Are they hard to get a hold of?
• How do they plan to communicate? Do they like phone calls or texts or emails?
• Will they help you with goals and life changes?

Make an agreement with them on how you want to communicate and make sure they understand your expectations.

A financial advisor with poor communication skills is the absolute last thing you want. You want someone with good interpersonal skills that you can trust to walk you through market trends and who will be there when the stock market makes a large correction.

Expectations are EVERYTHING.

Go through your expectations with your advisor so that you can start off on the same page.

8. What are your credentials?

Last, but certainly not least, make sure you ask for their credentials.

This should be public information and you should be able to look it up on your own as well.

It's very, very important that you work with someone with the proper credentials that has years of experience.

Best Financial Advisor Interview Questions

I hope this list of the right questions to ask a financial advisor was helpful! Make sure to take your time to find the right person and don't be rushed into anything. As a potential client, you have every right to ask anything you want of the one person that you will be trusting with your finances.

If you are feeling concerned in your gut, then DO NOT move forward. Make sure you feel calm about the decision as you are directly putting your financial freedom and goals in this person's hands.

A good financial advisor will be happy to answer any of these questions. If it sounds too good to be true, it most certainly is.

This is your future and the relationship you make with this person strongly impacts the direction of your family so do your research and make sure all of your questions are answered to your standard.

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