5 Important Questions to Ask Your Financial Adviser
The answers to these questions can help make sure you're getting smart guidance from the right person.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
Most people don't have a lot of room for error when it comes to where and how they invest their money, especially as they grow older. Even people who do have a little cushion have no interest in needlessly losing money.
That's why when you go in search of investment advice you want to make certain you're getting the right guidance from the right person. And frankly, that's not always easy to determine.
You can better weigh a financial professional's recommendations if you find out a little bit about them before you start acting on their advice.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
With that in mind, here are five important questions you should ask a financial adviser:
1. Are you a fiduciary?
This question might not occur to everyone, but it can be helpful to understand that in the investment world, there are two standards—the suitability standard and the fiduciary standard.
Financial professionals who operate under the suitability standard offer you products for sale from a range that is available from the company or companies they represent. They are paid commissions calculated as a percentage of the amount you pay to purchase the product. By law, the guidance they give and the products they sell you must be suitable for your needs, objectives and unique circumstances. Financial professionals operating under this standard would include insurance agents (producers), as well as brokers (registered representatives).
A financial professional operating under the fiduciary standard must present, by law, the best advice he or she can give, taking into consideration the needs, wants and objectives of the individual consumer. The client's needs and personal objectives must come first. Typically, fiduciaries are paid a recurring fee calculated as a percentage of the market-based assets for which he or she is providing advisory services (not commissions). Financial professionals operating under this standard would include investment adviser representatives.
2. How do you get paid for the services you provide?
This question is important because it's not just about the adviser's bottom line. It also affects your bottom line. Typically, there are three ways advisers make money: They charge the client a flat fee, perhaps based on an hourly rate for their advice; they charge the client a fee that is a set percentage of the assets under their management; or they make a commission for selling insurance products, mutual funds or other investments. When a fee is based on the percentage of the assets, not only does that eliminate the conflict of interest you can have with commissions, but it also ties the adviser's success to the client's success. Think of it this way: A broker who sells a financial product for a commission is unaffected by the losses or gains. But a fiduciary whose fee is determined by the value of the assets has an incentive to make sure the plan is in line with the client's financial goals.
3. What licenses or credentials do you have?
Do they have only a securities license? Just an insurance license? Can they provide services in both? You can do a little online research on a financial professional yourself. For example, FINRA.org has a free search tool called Broker Check. Just type in a name to find background information about a financial professional. The Securities and Exchange Commission has a similar search tool called Investment Adviser Public Disclosure. You also can visit your state's department of insurance website and verify whether an insurance producer is licensed.
4. Can you show me a sample financial strategy or plan?
Advisers should have a well-defined process they use when making recommendations. That doesn't mean they should have a cookie-cutter plan that they give out to everyone—far from it. Every client's goals and resources are different, so there should be a process for determining what's best for your situation. They should be able to show you what that process is or provide you a sample plan that demonstrates how they develop a recommendation to fit your situation.
5. Have your ever been publicly disciplined for illegal or unethical activities, or filed for bankruptcy?
It's amazing how many people who claim to be financial advisers can't handle their own money. In fact, it's downright scary seeing them give advice when their track records show they can't follow that advice themselves. You should be able to practice what you preach and have a good handle on what you're talking about before handing out advice to others.
Joshua M. Blaker is founder and president of Accrue Wealth Designs, a full-service financial advisory firm. He has passed the Series 65 securities exam, qualifying him as an Investment Adviser Representative in Arizona, and holds the Registered Financial Consultant (RFC®) designation. He is also licensed as an Insurance Professional in multiple states for life and health insurance.
-
Ask the Tax Editor: Federal Income Tax DeductionsAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on federal income tax deductions
-
States With No-Fault Car Insurance Laws (and How No-Fault Car Insurance Works)A breakdown of the confusing rules around no-fault car insurance in every state where it exists.
-
7 Frugal Habits to Keep Even When You're RichSome frugal habits are worth it, no matter what tax bracket you're in.
-
For the 2% Club, the Guardrails Approach and the 4% Rule Do Not Work: Here's What Works InsteadFor retirees with a pension, traditional withdrawal rules could be too restrictive. You need a tailored income plan that is much more flexible and realistic.
-
Retiring Next Year? Now Is the Time to Start Designing What Your Retirement Will Look LikeThis is when you should be shifting your focus from growing your portfolio to designing an income and tax strategy that aligns your resources with your purpose.
-
I'm a Financial Planner: This Layered Approach for Your Retirement Money Can Help Lower Your StressTo be confident about retirement, consider building a safety net by dividing assets into distinct layers and establishing a regular review process. Here's how.
-
The 4 Estate Planning Documents Every High-Net-Worth Family Needs (Not Just a Will)The key to successful estate planning for HNW families isn't just drafting these four documents, but ensuring they're current and immediately accessible.
-
Love and Legacy: What Couples Rarely Talk About (But Should)Couples who talk openly about finances, including estate planning, are more likely to head into retirement joyfully. How can you get the conversation going?
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to ChanceAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
I'm a Financial Adviser: This Is Why I Became an Advocate for Fee-Only Financial AdviceCan financial advisers who earn commissions on product sales give clients the best advice? For one professional, changing track was the clear choice.
