When writing this article, I asked myself one important question: “What would I want my wife to ask a financial advisor if something happened to me?” That question led me to these 10 key questions.
Choosing the right financial advisor can have a significant impact on your financial future, and it’s important to take an active role in the process. Rather than being passive, go on offense — ask direct questions and expect clear, thoughtful answers. Doing so can help you feel confident that you’re working with someone who genuinely has your best interests in mind.
Here are some important questions to consider — along with what to listen for in their responses:
1. Are you legally required to act in my best interest at all times?
Why It Matters: This question determines if the advisor is a fiduciary, meaning they’re legally obligated to put your interests first. Non-fiduciary advisors, often broker-dealers, only need to ensure recommendations are “suitable,” which can lead to conflicts, like recommending products for higher commissions.
What to Listen For: A firm “yes” is ideal. If they hesitate or say no, it’s a red flag—they might prioritize their earnings over your needs.
Additional Insights: Many advisors aren’t fiduciaries and act more like salespeople, pushing products for commissions. Importantly, they won’t volunteer this information, so you must ask. Also, watch out if they seem to have pre-decided recommendations without understanding your situation first.
2. How are you compensated?
Why It Matters: Understanding how an advisor gets paid helps spot potential conflicts. For example, commission-based advisors might recommend pricey mutual funds for a bigger payout, not because they’re best for you.
Compensation Types:
| Type | Description | Potential Concerns |
|---|---|---|
| Flat Fees | Fixed amount for services | None, generally transparent |
| Hourly Rates | Charged per hour worked | Best for occasional help, like one-off advice |
| Percentage of AUM | Fee based on assets managed, e.g., 1% yearly | Could incentivize growing your portfolio, not necessarily your goals |
| Commissions | Earned from selling financial products | Risk of biased recommendations for higher commissions |
What to Ask: If commissions are involved, request a clear explanation of the amount and how it affects advice. For someone needing occasional guidance, hourly rates might suit; for ongoing help, a percentage of AUM or flat fee could work better.
3. Do you hold any credentials, such as the CFP®, that require fiduciary responsibility?
Why It Matters: Credentials like Certified Financial Planner (CFP) require advisors to act as fiduciaries and undergo high standard of education.
Other Credentials to Know:
- CFA (Chartered Financial Analyst): Focuses on investments, often fiduciary in practice but not always required.
- CPA (Certified Public Accountant): Primarily for taxes, not financial planning; be cautious taking financial advice from a CPA unless they’re also a financial professional.
- Series 7, 65, 66: Licenses for selling securities or advising, but don’t guarantee fiduciary duty.
What to Look For: Aim for advisors with CFP, as it’s widely recognized for comprehensive planning and fiduciary commitment. At minimum, they should have passed exams like Series 65 for advising.
4. What is your total annual fee, including management fees, commissions, and expense ratios?
Why It Matters: Fees can eat into your returns over time and you deserve to get the most for the fee you pay.
What to Ask: Request a breakdown of all costs, including the advisor’s fee, any commissions, and investment product fees like mutual fund expenses or ETF fees.
Tip: As a client, you want to know the total cost for everything recommended, not just what the advisor charges for their service.
5. What services do you provide in exchange for your fees?
Why It Matters: Some advisors only manage investments, while others offer comprehensive planning, including taxes, retirement, and income planning strategies. Getting a full picture service is important in the firm you choose. The landscape has changed over the years. Financial advisors years ago really only focused on investment management. Now a days it is rare to see a firm that does not offer ongoing comprehensive planning alongside the investment management. If all you are getting is investment management in 2025, it is important to reconsider the relationship.
6. How often will I hear from you about my portfolio and financial plan?
Why It Matters: Regular check-ins keep your plan aligned with changing goals.
What to Expect: Ideally, at least annual reviews, with availability for questions in between. Communication should go both ways for a strong relationship.
Tip: Ask what a year looks like as a client to set expectations upfront. Establishing this connection before committing to a relationship is crucial.
7. Can you provide a detailed, written financial plan?
Why It Matters: A written plan is your roadmap, outlining goals, strategies, and actions. It helps track progress and hold the advisor accountable.
What to Look For: The plan should cover investments, tax strategies, retirement goals, and more. Logging into a financial planning portal for easy access is even more ideal.
Tip: Don’t decide in their office—take time to review at home.
8. What steps do you take to understand my risk tolerance?
Why It Matters: Risk tolerance affects investment choices. Taking too much risk could lead to losses you can’t handle, while too little might hinder growth.
What to Expect: They might use questionnaires or discussions to assess your comfort with market ups and downs, investment timeline, and priorities.
Tip: Misaligning risk can be detrimental, so ensure they get this right.
9. Do you incorporate tax planning, retirement strategies, and estate planning into your financial plan?
Why It Matters: A holistic plan saves money and avoids mistakes. For example, tax strategies can reduce liabilities, and estate planning ensures your assets go where you want.
What to Ask: Confirm they include these areas or coordinate with specialists. Financial planning isn’t one-and-done; it needs annual updates.
10. Do you coordinate with my CPA or estate attorney?
Why It Matters: Financial planning often involves multiple experts. Coordination ensures everything aligns, like tax strategies with your CPA’s advice.
What to Listen For: They should be flexible and willing to work with your other professionals, showing a collaborative approach.
Finding the right financial advisor is one of the most important decisions you can make for your financial future. By taking an active role in the conversation and asking thoughtful questions, you can gain confidence that your advisor has your best interests at heart. Keep in mind that a good advisor should naturally address most of these topics without you even having to ask. If you reach the end of a meeting and realize none of these key points have been covered, consider it a red flag. The right advisor will welcome your questions, provide clear answers, and prioritize your financial well-being from the start.
Asking these questions can help you feel more confident in your financial decisions. At Brooks Wealth Management, we welcome these conversations because we believe informed clients make better financial choices. If you’d like to talk through your financial plan, we’d be happy to help.
Disclosure: The information provided in this post is for general informational and educational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The content reflects the opinions of Brooks Wealth Management and should not be considered as personalized financial advice. Readers are encouraged to seek their own professional advice from a qualified financial advisor before making any investment or financial decisions based on the information provided here. If you’d like to discuss your specific financial situation or seek personalized advice, please contact us to schedule a consultation.