Forgot your password?

Questions to Ask a Financial Planner

By Edited Jun 1, 2016 0 0

It is your job to interview a financial planner, not the other way around, so it is important that you learn the right questions to ask a financial planner to determine whether they are a good fit for you.  Choosing a financial planner can be a difficult task.  Their industry is largely cloaked in mystery, which leads to skepticism on the part of many individuals seeking their services.  To save you the trouble of dealing with an unscrupulous financial planner, be sure to learn the questions to ask a financial planner by taking in the below information.


How Long Have You Been In Business:  You have to think about financial advisors as stand alone businesses.  You would not trust your car in the hands of a mechanic who has been on the job for a few months.  You must treat your financial decisions in the same fashion.  Financial advisors for the most part work independently, regardless of any firm affiliation.  They are typically responsible for building their own book of business, and then running that business.  The turnover rate for financial advisors with under five years of experience is extremely high.  The last thing you want is to have your advisor disappear on you a year into the relationship.  You want somebody who will be with you for the long haul.  It is obvious why.  In my experience, I have found that ten years is the minimum requirement in terms of signing the dotted line with a new financial advisor.  Those who have been building their business for this long are very likely to stick around.  Most parent companies under which financial advisors operate require them to sign a non-compete agreement which denies them the ability to take clients with them if they leave for whatever reason.  So, I would not expect an advisor with a mature book of business to walk away from it.  Ten years in the business should guarantee you a long-term relationship.  As you can tell, this is one of the most important questions to ask a financial planner.


Tell Me About Your Education:  Another important question to ask a financial planner is related to their educational background.  Remember, even though the financial planner is showing up to interview you, you are the one paying for their service, so like any other employer, you have to interview them as well.  Ask about their educational background, what they studied in college.  Remember, in many cases, financial advisors are sales people first and financial people second, and not even a close second.  Dig into their background and gain an understanding of what makes them good at what they do.  Do your homework (reading this is a good start) and ask the right questions.  Professional designations are the key to finding a really committed financial planner.  The CFP® is a popular designation, as is the CLU, CFA and even CPA.  Designations go a long way in showing that a financial advisor is committed to his or her craft.  This is the educational piece that needs to be juxtaposed with the sales acumen in order to have a well rounded financial planner.  One or a combination of these professional designations provides instant comfort in choosing a new financial advisor.


Do You Have Historical Returns For Review:  This is a question that a lot of people overlook when thinking of questions to ask a financial planner.  However, depending on the products that they intend to sell you, it may be on of the most important questions you ask.  Even if you do not see yourself investing liquid assets with he or she immediately, you may be doing so indirectly through a life insurance product.  In many cases, a financial advisor will generally leave the asset management up to the portfolio professionals at hedge funds, mutual funds or index funds.  However, it is up to them to decide where to bundle their clients’ assets and with whom to invest them.  The advisor should be able to provide you with historical returns for assets under management without disclosing any client specific information.  Push them on this.  Do your own homework and make sure that they are at least performing as well or in the range of the major benchmarks such as the S&P 500, Russell 2000 or DOW Jones Industrial Average.  Certainly look to confirm that their returns exceed the risk free rate which is generally determined by the rate of the 10 year Treasury Bill.  If returns fall below either of these averages, ask the financial advisor why and how they plan to remediate the situation.  Their answer will give you some quality insight into their investment perspective and whether they have a grasp on the overall market mechanics.


Do You Have Any Referrals:  To go along with all of the other questions that we have proposed here, you will also want to ask for referrals.  If you have followed in the instructions above and found somebody who meets the basic tenure requirements, they should have some happy customers whose information they can share with you.  There is no better way to learn about a financial planner than to ask their current clients about how they operate.  Financial advisors range in quality from very poor to fantastic.  Clients of both spectrums will be glad to share their perspective regarding the business practices of the financial advisor in question.  Ask for a couple of people to call.  Ask them how long they have worked with the person, ask them what type of products they have with them and how they have fared in recent years.  Ask them whether they have referred any family or friends to this particular advisor.  If not, ask why? 


Suggested Reading:  The Wall Street Journal a few years back put out a bunch of handy financial guides aimed at teaching the masses about finance.  Their book on personal finance called The Complete Personal Finance Guidebook

is a great read and will put you in a more educated position when speaking with a potential financial planner. 

 Questions in Review:  So now we have a few great questions to ask a financial advisor that should lead you down a prosperous and mutually beneficial path.  First, make sure you know how long they have been in business.  Second, confirm that they have the proper education, third, confirm their historical returns, and last but not least, ask for referrals and follow up!  Have any other suggestions?  Share them with the community by commenting below.



Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.


Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow IB Business & Money