Finding a financial advisor isn’t like buying a carton of milk — you don’t want to just show up and pick the first one off the shelf. That said, it also isn’t like buying a car, where you can test drive each model and see if you like the way it feels. Hiring a financial advisor is honestly more like being a business and looking for a new employee — you want to do research, talk to multiple candidates, and make the pick you think will be the best fit for you. This can be intimidating, though, if you don’t know exactly how to go about interviewing the people you might consider trusting with your money and your financial future. With that in mind, this page will walk you through what you need to know when hiring and interviewing potential financial advisors.
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Step 1: Narrow Your Search
The first step to hiring a financial advisor is to find candidates who make sense for your lifestyle and financial situation. If you have $100,000 in assets you’re looking to invest, don’t set up interviews with advisors who cater to high-net-worth clients — they’ll likely require many millions in investable assets and will, thus, be a bad fit for you.
The size of your portfolio isn’t the only thing to consider here, though. Read on the advisor’s website — or through reviews right here on SmartAsset — and see what his or her investing philosophy is. If an investor focuses only on investing in mutual funds and you want an advisor who will help you invest in individual stocks, this professional probably isn’t for you. Much of this information is available either on a firm’s website or in the advisor’s SEC filings, so make sure to take the time now.
Step 2: Shop Around
If you find an advisor who seems like a perfect fit, it may be tempting to talk only to that one person. It is always a good idea, though, to set up at least three interviews with potential advisors before moving forward. One advisor may seem like the perfect match on paper, but another one will have a personality and style that meshes perfectly with you. You won’t discover that, though, unless you talk to the advisor directly.
Step 3: Ask the Right Questions
Once you’ve found a few advisors you’re interested in and scheduled interviews with them, you’ve reached the hardest part of all of this — actually talking to advisors. All advisors are going to be trying to sell themselves to you, presenting their best self and using all of the advertising language they can think of.
It’s up to you to cut through that and get to the heart of the matter by asking smart questions. Here are some questions you should make sure you ask every financial advisor you meet with:
- Do you abide by fiduciary duty? If an advisor is bound by fiduciary duty, he or she has to act in the best interest of the client. Those who aren’t bound by this standard are held only to the suitability standard — meaning they could recommend a product or investment that technically works for you, but isn’t the best option.
- What services do you provide? Not every advisor does the same things. Some only manage investments, while others offer myriad financial planning services such as retirement planning, estate planning, tax services, insurance planning, charitable giving planning and cash flow management. Make sure the advisors you are interviewing provide the services that you require from your financial advisor.
- How do you make money? Talking about an advisor’s fee structure is likely the most important part of any financial advisor interview. To put it simply, there are two basic fee structures advisors will offer: fee-only and fee-based. A fee-only advisor earns money from advising fees. These could be fixed fees, hourly fees or, most frequently, a fee based on a percentage of the assets they are managing for you. A fee-based advisor, on the other hand, makes money from fees in addition to earning commissions from selling insurance or investment products. This is intrinsically a conflict of interest. A fee-based structure may or may not be a deal breaker for you, but make sure you know exactly how each advisor you interview would get money from you if you choose to work with that particular person.
- What is your investment philosophy? Hopefully, you ruled out any advisors with investment philosophies wildly different from what you want during the research phase. Still, make sure you ask each candidate to opine on their investment strategies during the interview. Ask how they pick investments, if they prefer active or passively managed funds and what their ideal asset allocation for you would be. Make sure to ask follow ups and get the best sense you can of how each person would manage your money.
- How do you communicate with clients? Some advisors will simply send you a statement here and there and be done with it. Others will want to check in a few times a year, either by phone or online. Make sure you know how — and how often — an advisor is going to be in touch with you, and pick one whose communication style you like.
Step 4: Weigh Your Options
Once you’ve gathered all the information you can, it’s time to make your decision. Think about everything you’ve learned from your research and interviews. Now is also a time you could ask each advisor for a current client you could talk to. How you make your final choice is up to you, but don’t wait too long — you want to get started.
Step 5: Make a Choice and Move Forward
Now it’s time to finally pick an advisor. Let the also-rans know your decision, and get ready to have a meeting with your final choice about moving forward. You’ll likely have to fill out some paperwork and start to talk about what strategies you want to pursue. Your advisor will also likely want to see all of your active accounts, from checking and savings accounts to any retirement savings vehicles (like a 401(k)) you have, so make sure all of your documentation is available and up to date.
What Should I Look For When Hiring a Financial Advisor?
When hiring a financial advisor, you’ll want to make sure that you find the right fit for what you’re looking to accomplish. For example, if you need someone who can help you with estate planning then you probably aren’t going to look for an advisor that only focuses on managing your investments. Everyone has different needs and advisors can all have different specialties. You’ll at least want a firm that can help you with the things you need help with.
You’ll want to make sure you understand how your advisor gets paid and what their fiduciary responsibility is to you before you decide to work with them. This can change your expectations and you don’t want any surprises down the line.
The best thing you can do to vet a potential financial advisor besides asking them the right questions is to do research on their expertise and experience with clients. Ask to speak to some of their clients or do research online to see if past clients have shared their experiences about working with the advisor you’re considering. A lot of negative reviews on the advisor or firm can be a red flag, but not being able to service your specific needs can also be a dealbreaker.
The Bottom Line
Finding a financial advisor is an important step to securing your financial future. By following the steps outlined above, you can make an informed and productive decision about which financial advisor you work with.
Financial Advisor Tips
- SmartAsset can help with the search for your financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you don’t think you’re quire ready for an advisor, finding a roboadvisor is a good option for you.
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