Do You Have the Right Financial Advisor? 5 Questions to Ask


What do shoe shopping and bad haircuts have in common with choosing a professional for your personal finances? Read on to find out.

How do you know if you have the right financial advisor? Below are five important questions to help you determine if you are working with a financial professional who is best suited to your specific situation.

1. Are you a good fit relative to your advisor’s current client base?

Are you in your 30s, looking to build your wealth, while your advisor typically works with retirees in their 70s? Does their average client have significantly more or significantly less in assets than your household?

Think of it like having one shot to buy your most important pair of shoes. If you are an avid runner who needs a size 7 running shoe, and you go to a store that specializes in extra-large work boots, you may wind up in a situation that’s not a good fit. The same thing can happen with your advisor relationship.

2. How does your financial advisor get paid? Are they transparent about their fees?

A better question may be whether your advisor is a fiduciary. Fiduciaries are regulated and required to be completely transparent with their fees and compensation in a way that non-fiduciary financial advisors are not. Without full transparency you can’t be sure whether an advisor’s recommendations are best for your financial picture or if their advice was motivated by their own financial self-interest.

Does your advisor recommend proprietary products, created by their employer, or do they put forth the low-cost third-party solutions? Remember, your return on investment after the payment of all fees and taxes is what matters. It’s hard to know if you are maximizing your returns if you do not know how much you are paying.

3. Do you have a good understanding of the operating model and overall strategy of their firm?

Does the firm believe in goals-based planning specific to each client or is it a one-size –fits-all approach? How frequently do they plan on trading assets, and what triggers are those decisions based upon? What types of tools (if any) do they use to assess your risk tolerance and develop your asset allocation?

A good cultural fit between the advisory firm and you, the client, will help determine compatibility in the long run.

4. Are ancillary personal financial services offered via their firm?

Tax preparation, estate planning, risk management solutions via life insurance – all these considerations should be part of a discussion with your advisor.

The question is “how seamlessly can your advisor help you integrate solutions to address these needs?” Would they refer you to their colleague across the hall whom they have worked closely with for years, or would it be a friend of a friend who provides solutions? Or do they not even have the right expert connections to offer this kind of support?

Having built-in integration and expertise through other professionals affiliated with the advisor’s firm is not only more convenient for you as the client, but it also supports better communication amongst your key providers, and potentially economies of scale in terms of pricing.

5. Does your advisor trust their own strategies?

During 2020, many more people were cooking at home. For better or worse, some of us even cut our own hair! A good question for your advisor is whether they eat their own cooking when it comes to financial matters.

Do they invest with their own firm? Do they embrace the same strategies for themselves that they are recommending for clients? If they do not have confidence in their program, should you?

A bad haircut can grow out in just a few weeks, but a bad, ill-informed decision when choosing your financial advisor could take many years to repair. Ask the right questions to find a qualified financial advisor best suited to your needs and your personal financial goals.

Jay Pelham, CFP®, is President at Kaufman Rossin Wealth, LLC, a Registered Investment Adviser.

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