Pass On The Pitch: 5 Questions to Ask When Hiring a Financial Professional

Evaluating which pro to guide your retirement plans takes more than passively listening to a sales pitch. Speak up.

(Image credit: Rene Mansi)

Choosing a financial professional can be a daunting task.

Most advisers I know say they actually prefer it when prospective clients check out several candidates before making a decision. It’s the one of the best ways to find a good fit.

But you can’t make an apples-to-apples comparison if you just sit and listen to a bunch of pitches. Make it an interview. Ask a lot of questions. And ask the same questions every time.

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Then you can measure the pluses and minuses of each person and what they can do for you.

Obviously trust, integrity and transparency are important qualities you want to focus on. But how do you drill down to that level at a first meeting?

Here are a few questions to get you started.

1. Are you working in my best interests? Registered Investment Advisers are fiduciaries; they’re legally and ethically required to put their clients’ interests first. Brokers are held to a different standard, which requires that they make recommendations based only on the “suitability” of an investment. The products they sell don’t have to be the best or least expensive as long as they meet the client’s needs, which can open the door to conflicts of interest. If a candidate says he’s a fiduciary, get it in writing.

2. What kind of fees will I be looking at? Get this in writing, as well. You want to know about EVERYTHING: adviser fees, custodian fees, investment management fees and trading costs. Ask about disclosed and undisclosed fees. Examples of undisclosed, or hidden fees, would include trading costs and tax implications with mutual funds, spreads on bonds, and M&E costs on annuities. Only then can you compare one adviser and the products they intend to use to the next.

3. What processes do you have in place to help make sure your recommendations are in line with my risk tolerance? Risk exposure should be a big part of your conversation with every candidate. Too often, investors just turn over their money and let an adviser pick the portfolio mix. That’s like going to the doctor and getting a prescription without talking about symptoms or getting an exam. There are many tools available to assess your comfort level and capacity for risk.

4. How will I be rewarded for taking risk? This is all about gauging performance. Once you’ve talked about risk exposure and risk tolerance, you should ask about the end result — or what you’ll get back for taking that risk. You’re trusting this person with your money, so what’s in it for you? For comparison, I suggest using an industry standard, such as the Sharpe Ratio, to compare risk/return of one portfolio to another.

5. Are the investment returns your company reports audited? Who does the auditing? You want to hear that their returns are audited by Global Investment Performance Standards (GIPS), which has the most widely accepted auditing standards. The adviser you choose should have a consistent, audited track record.

Remember: Don’t fall for a sales pitch. The clearer and more prepared an adviser is with the answers to these questions, it can help you as you make decisions on your search for a financial adviser to build a relationship with. Investing is complicated — that’s why you need help. Make sure you find someone you can communicate with and someone you can trust.

Kim Franke-Folstad contributed to this article.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Chris Abts, Investment Adviser Representative
President, Cornerstone

Chris Abts is president and founder of Cornerstone in Reno, Nevada. He holds a Series 65 securities registration and has earned the Certified Estate Planner (CEP) and Chartered Retirement Planning Counselor (CRPC) professional designations.