20 Questions To Ask Financial Advisors | Inspire Wealth Partners
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JUN 16, 2020 · 3 MIN READ

20 Questions To Ask Financial Advisors

By Matt Cooley, CFP® · Inspire Wealth Partners

Just like all restaurants don’t serve the same food, all financial advisors don’t provide the same services, get compensated the same way, or serve the same type of clients.

Whether you’re already working with a financial advisor or evaluating prospective advisors, asking the following questions should provide clarity and confidence you’re working with an advisor perfectly suited to serve your unique needs:

1. Are you a fiduciary?
A fiduciary is required to act in the best interests of their clients. Most advisors are not held to this standard because of the way their firm is registered.
2. Are you willing to state your fiduciary status in writing?
A good practice is to have your advisor state their fiduciary status in writing.
3. Is your firm independent?
Independence enables autonomy and flexibility to seek best-in-class solutions for clients.
4. Are you beholden to proprietary products or solutions?
Some advisors may earn more by recommending proprietary products over others.
5. How are you compensated?
Advisors can be compensated many ways — commissions, kickbacks, sales contests, and a % of your assets. We believe the most transparent and fair arrangement is a flat-fixed fee paid directly by the client.
6. How do your fees compare to industry averages?
If you’re paying above-average advisory fees, what are you receiving in return?
7. Can you show me every fee and expense I would pay?
One of the most overlooked aspects of investing is fund expenses. If your weighted-average fund fees are greater than 0.50%, you’re likely paying too much. Also ask about transaction fees and other product charges.
8. Do you earn or pay referral fees?
Some advisors pay for your business. Others are incentivized to refer you to certain professionals in exchange for a referral fee.
9. Do you share revenue with anyone else?
Some advisors may have incentive to invest in certain funds that provide the advisor a kickback.
10. Do you receive commissions of any kind?
Commission-based compensation can increase the likelihood that a conflict of interest exists.
11. What type of clients do you serve?
Aligning with an advisor that serves clients like you ensures their expertise matches your unique needs.
12. What is your investment philosophy?
Regardless of the philosophy, make sure you understand what you own and why you own it.
13. How do you manage risk?
There are many ways to manage portfolio risk, but we believe the most prudent way for most investors is through asset allocation and diversification.
14. Do you believe you can beat the market?
The SPIVA report shows almost no one has reliably or consistently beaten the market through security selection, market timing, or other active strategies.
15. How often do you trade?
Excessive trading can lead to increased costs and tax liability.
16. What services can I expect to receive?
Some advisors only manage your portfolio; others also work with you on tax planning, estate planning, and other financial planning topics.
17. What credentials do you have?
Not all credentials are created equally. Some require a 60-minute test; the CFP® requires years of rigorous education, exams, experience, and ethics requirements.
18. How do you manage your own money?
Does the advisor practice what they preach?
19. Can you tell me about your conflicts of interest?
The industry is notorious for conflicts of interest. Make sure you’re aware of any that may exist for the advisor.
20. Do you have any disclosure events?
A disclosure event is any legal or disciplinary action that must be made public.
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