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5 Things You Should Ask Your Financial Advisor

If you’re an accredited investor, you have a whole world of options beyond investing in publicly traded stocks, bonds, and mutual funds.  And, thanks to recent changes in the law made by the JOBS Act, you’re about to be inundated with opportunities to invest, if you haven’t been already.  Weeding them out will take some financial acumen. Are you up to the challenge? If you want to throw your proverbial hat into the ring and start making some investments, even on a smaller scale, but aren’t confident you can do so without ending up with said hat in your hands, a financial advisor can help.

Financial advisors can really be anyone from someone smarter than you to someone certified and bona fide with education and experience, to, most unfortunately, the guy who just finished two years in Club Fed for embezzlement.  How do you find a great advisor?   Personal recommendations are a great place to start.  The National Association of Personal Financial Advisors is also a good resource

Hiring a financial advisor is somewhat like hiring a nanny for your kids. You’ll want to find someone you can trust, who has a good reputation and solid references, a proven track record of quality and who won’t nip from your nest egg when you aren’t looking. Never be afraid to ask questions and request proof. In fact, a good financial advisor will already have it ready for you.

Here are some questions to put on your list:

  1. What are your certifications? A reputable financial advisor should have at least one acronym following their name. Most will have CFP, a Certified Financial Planner designation that shows they’re licensed, regulated and required to pursue ongoing education. Ask for the designations the advisor has and then, if you have questions, ask them to explain. The SEC says they have to. FINRA has a nifty designation decoder function so you can study up ahead of your face-to-face. Are the certifications current? Check it out and while you’re at it, consider running a background check. It’s perfectly normal and within your rights. If a CFP has been disciplined, you can learn more here.
  2. How do you get paid?  On the one hand, just like any salesperson, a general rule of thumb is that someone paid on commission may have the incentive to work harder to earn their keep than someone who is guaranteed a flat, hourly rate. Their success is directly proportional to the success they create for you. However, beware that some commission-based advisors combine sales techniques with their other services and someone working for commission may have the incentive to “churn” your account.  You need to understand how your advisor gets paid and then you need to decide if you are comfortable with it.
  3. Are you a fiduciary? Also, what is a fiduciary? A fiduciary is a financial professional who must, by law, have your best interest at heart. Request a copy of an advisor’s code of ethics and make sure the language includes a commitment to prioritizing your needs and a fiduciary responsibility to recommend a course of action that will be best for your money. Not being a fiduciary is a deal breaker, walk way. Keep mind that skills and credibility play as big a role as professional designations. Go for the trifecta.
  4. Can you prove the success you say you’ve had? A financial advisor worth her salt will have documentation available that lets you examine her track record, like a quarterly trading report. If you don’t understand all the numbers and jargon, don’t hesitate to ask for an explanation. Ask about the reasoning behind this or that investment. Locate where the fees were taken out. Make sure that you will always have access to similar reports pertaining to your own investments, for tracking and record keeping.
  5. How does your experience relate to my situation? Some financial advisors only work with certain types of clients, like the very wealthy. Others have the bulk of their experience in one particular asset class, like real estate or insurance. It’s important that your financial advisor has a background in areas that relate to your financial situation and your goals. Discuss education, work history, previous investments, and areas of concentration. You’ll want someone who can advise you because she has been there and done that. Not someone who thinks they can if they give it the old college try.

For more advice, check out “Looking for a financial advisor? Here’s what not to do” by the Financial Poise Editors.

About Alicia Purdy

Alicia Purdy is the Managing Editor of Columnists at She holds a Master's degree in Journalism and has spent over a decade working as a freelance writer and editor in finance, politics and government and business.

View all articles by Alicia Purdy »

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