This post is a continuation of yesterday’s post, 12 Things You Should Know About Choosing An Adviser.  You’ll be paying this person a great deal of money over the years, so you should interview several before choosing one.  Don’t feel guilty about being assertive about establishing this business relationship.  You want someone you’ll be happy with for years to come.  Consider asking these questions or other similar ones:

How do I pay you and what other sources of income do you have other than client’s fees, such as soft-dollar arrangements, loads, and commissions?

This question is essential to knowing the adviser’s conflicts of interest.

What do you do and what don’t you do?

You can show him a list of your financial needs and he can then show you what he is qualified to take care of and what is covered by his fees.  Consider having these on your list:

  1. Developing a comprehensive saving/spending plan
  2. Developing an investment plan
  3. Maintaining the investment plan through investing new funds, tax loss harvesting, rebalancing, calculation of returns and comparisons to benchmarks etc.
  4. Life insurance
  5. Disability insurance
  6. Property insurance
  7. Liability insurance
  8. Tax planning
  9. Tax preparation
  10. Estate planning including preparation of wills and trusts

What designations do you hold?

You probably should have checked this out prior to meeting with him.  Look them up here.

What kind of annual returns can I expect after taxes and fees by investing with you?

The key here is not what the number is, but the explanation that comes with it.  You certainly aren’t looking for the person that quotes the highest number, in fact, the lowest might be preferable.  You can definitely cross off your list anyone promising you average returns over 10%.  Ideally, the adviser will go into a long explanation about where returns come from and discuss the concept of long-term expected returns. Remember, the role of an adviser isn’t to generate excess returns through market timing and security selection.  A good adviser knows this and will explain this to you.

May I see the sample portfolios of a couple of your clients, preferably one from 5 years ago and one for the same client from now?

You’re looking for a roughly similar portfolio.  If there have been huge changes your adviser either gives inconsistent advice or is guilty of market timing.


May I see your personal portfolio and performance?

Does it look like the client’s portfolios?  You want an adviser that eats his own cooking.  If the adviser’s portfolio is only $20,000, do you really want someone this inexperienced managing your money?

What is your investment philosophy?

This question will tell you how up to date the adviser is on investment theory.  You can folllow it up with “What do you think about timing the market?” and “What do you think about using mostly index funds in a portfolio?”

Do you recommend variable annuities or cash value life insurance to many of your clients?

A yes answer should disqualify the adviser from your consideration.

Have you ever had any disciplinary action from regulatory authorities?

This is the time to ask about any complaints you found about the firm or the adviser on the FINRA website, the SEC website, or the Better Business Bureau.

Will you have a fiduciary requirement toward me?

This refers to whether the adviser is legally obligated to put your financial interests first, or if his first allegiance is to a firm.

How often will we meet and what reports will I receive from you?

The more you’re paying, the more face to face time you should expect.


Why did the last two clients that left you leave?  What about the last one you dismissed from your practice?  Would you mind giving me contact information to talk to them?

An adviser might not give you this information (citing privacy issues mostly likely), but if they do, it may be the most helpful thing you do.

The best way to establish a long-term relationship is going in with your eyes wide open.  Make sure you hire right or you’ll be doing the whole thing again in a year or two.  Also, don’t feel obligated to hire someone who lives in your town.  Most financial advising can easily occur by email or phone.  I’d rather have a great adviser who lives across the country than a mediocre one who lives next door.

My list of recommended advisors can be found here:

Recommended Financial Advisors

What questions would you ask a financial advisor before hiring him? Comment below!