There are many types of “financial advisors”; this title is not a regulated term with a standard meaning. In order to understand what you are paying for and what type of service you will receive, ask the financial advisor a series of challenging questions to gauge their fit for your family’s needs. Heck, ask us these questions too!
Question 1: Are you a fiduciary? If yes, can you explain your fiduciary oath? If no, can you explain why not?
Question 2a: How are you compensated? Please describe all sources of your & your company’s compensation and approximately what percentage of revenue comes from each.
- Do you have minimum fees?
- Will my fees change over time? If so, what factors will affect my fees?
Question 2b: Are you fee-only, fee-based, or commission-only?
- If you are fee-based or commission-only, can you describe the fee structures that clients are typically charged?
- If you are fee-only, do you charge based on my account size (known as “assets under management”), flat/project-based fees, or both?
Question 3: How do you approach client questions about real estate investments, either for personal use or for income & appreciation? Are your fees impacted if I choose to use my assets to purchase real estate?
Question 4: What is your view on traditional investments, such as stocks and bonds? Do you attempt to actively pick stocks & bonds you think will outperform, or do you generally invest in low-cost index funds that track the market?
Question 5: What do you believe are the most significant factors that will affect our ability to retire on time?
Question 6: What is your educational and professional background?
Question 7: Do you have any financial designations, and if so, what do they mean?
Question 8: Can you describe the financial planning process we can expect to undergo with your firm? What will happen immediately, and what will be implemented over time?
Question 9: How do you recommend I go about evaluating and purchasing insurance products, such as life insurance?
Question 10: Can you provide professional references that I can follow up with?
Additional resources for consumers are located with NAPFA, the National Association of Personal Financial Advisors. You can view a copy of NAPFA member’s Fiduciary Oath and Code of Ethics here, as well as top tips for consumers 5, 10, and 20 years away from retirement here. A more comprehensive question checklist is located here.
Search for a fee-only fiduciary advisor:
- XY Planning Network – all XY Planning Network advisors are also members of NAPFA; they also all offer some form of flat fees and generally do not have a minimum investment account size (though they may have a minimum fee that will be clearly stated).
*Disclosure: Real Estate Wealth Planning is a member of both NAPFA and the XY Planning Network of fee-only fiduciary financial advisors.