6 Questions Clients Should Ask Their Advisor

Ever wonder what your prospects are thinking?

by Michael Garry

Mr. Garry is a CERTIFIED FINANCIAL PLANNER™ practitioner and a NAPFA-registered Financial Advisor. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA). He is a frequent expert contributor to financial publications such as the Wall Street Journal, Money Magazine, Kiplinger’s, Businessweek.com, CNNMoney.com, and Consumer Reports Money Advisor, among others. Visit  Yardley Wealth.


1. “What qualifies you to offer financial planning advice, and do you hold any financial planning designations?”

Your prospective planner should be able to respond to this quickly and efficiently with details about her work experience, her educational background, any financial planning designations or certifications she has earned, and any professional organizations to which she belongs. If she can’t tell you right away, I would worry that she has no confidence in herself. If she doesn’t know why she is qualified, no one else will either.

It is not too difficult to find a planner with an educational background in Finance or Accounting, an MBA, JD, CPA, or other professional degree or designation, who is also a CFP ® Certificant. Again, finding someone with this resumé does not end your inquiry. Rather, it provides you with a sense that the planner has some knowledge of the subject matter. There are many people who call themselves financial planners who have very little actual financial training or real-world knowledge. Ask her open-ended questions to explore her knowledge and experience, like “Where have you worked,” “What types of clients have you worked with,” and “Do you typically work with clients like me?”

There are so many planners with advanced educational and professional qualifications that you have to ask yourself if it is worth the risk to hire someone who hasn’t gone through this intensive training. If you hire someone who doesn’t have it, you had really better be sure about her.

2. “What’s your philosophy and approach to financial planning?”

If her eyes glaze over, that should be a strike against her. Financial planning is a great profession and many in the industry love their work. You will be happier hiring someone who is enthusiastic about answering that question, although sometimes you may have to reel her in!

There are many different approaches and there is no “right answer” to this question per se, but you need to be comfortable with the answer and it needs to make sense for your situation.

3. “What type of client do you typically work with?”

Will you be her wealthiest or least wealthy client? Neither position is particularly desirable, although every planner has a richest and a poorest client. If you are her least wealthy client, you may be neglected in favor of her richer, and by extension, more profitable clients. If you are her wealthiest client, she may not be equipped to handle your situation. There are different strategies and options available for those who are very wealthy.

Some planners specialize by working with specific types of clients, like retirees or dual-citizens, or people who work for the same company. If she specializes like this, are you in one of her specialty groups?

Ask if she has a lot of experience working with people whose situation is similar to yours, in terms of where you are in your career, your age, your income, assets and net worth. If there is something really different about your situation, make sure you let her know what that is to to see if she is comfortable with it and will have the expertise to be able to help you.

4. “What size is your firm?”

Another consideration is the size of her firm, both in terms of employees and clients, as well as assets under management for those who offer investment advice. There are no clear-cut answers here, either; it depends upon your comfort level.

The Advisory Career

Some people prefer to have a large-sized planning and/or advisory firm. There is some comfort in the fact that so many other people have made the decision to go with the same firm. With a large firm you should be able to expect a well-developed process that your planner has gone through every time she takes on a new client.

You can also expect more depth. If your planner is out of the office temporarily, there is probably someone you can see in an emergency. Likewise, if she retires, or leaves suddenly, there are probably other planners similarly qualified and equipped to handle your situation.

The downside of a big firm is that you are less likely to have a very personal relationship with a specific advisor if the firm has five hundred or a thousand or ten thousand clients. As a client you may gradually have less interaction with the person you originally signed on with as she develops her business.
With a small firm, it is more likely that the planner and her employees will know you and your situation very well. You can probably expect more support and individualized service. You are more likely to deal with the same planner and her team for the length of your relationship, and you may come to know her very well.

The downside of a small firm is that if something happens to your planner, her firm may go out of business, or you may need to look for a new planner. This, of course, might also apply if you work with a large firm—you might be unhappy with a new planner assigned to you, and want to switch firms. But if potential for change is a big issue for you, you might want to work with a larger firm—even if you lose your original planner, you’ll still have the familiarity of the firm you’re used to working with.
To me, the amount of assets your planner’s firm manages isn’t an important issue. Some clients, however, like the comfort of knowing so many other investors have made the same decision you have. But remember, providing investment advice is not the same thing as providing financial planning services.

Because they are not the same business, many independent financial planners do not provide investment advice anyway. They’ll make recommendations, and may help you to carry some of them out, but they may not provide any investment advisory services for you or for anyone else. They may have no assets under management, or a very small amount that they manage for certain clients or people with whom they have personal relationships. It certainly has nothing to do with how good or bad they are at financial planning. You just won’t use them if you want your financial planner to also provide investment advice for you.

5. “Who will be implementing my financial plan?

You will need to clarify whether your planner will carry out her recommendations, whether she will refer others who will do so, or whether she will just give you recommendations and terminate the relationship. Since there are very few one-person firms, you need to ask what other people at her firm may be involved in your financial planning and what their duties are.

If she is fee-only, meaning she isn’t licensed to sell any products, and you need to buy any financial products, she will be able to guide you, but not sell them to you.

While that sounds inconvenient, if your planner has no interest in selling you products, you can probably be surer that her advice is objective. If she is creating a plan to sell you more products, then you have to be really wary and shouldn’t go to her in the first place. While we all would like to think that we are above doing something like that, that’s the essence of a conflict of interests.

6. “Can I have it in writing?”

Ask the advisor to provide you with a written agreement that details the services she will provide. Actually read it, don’t just recycle it! Then make sure she holds up her end of the bargain and does all that she has contracted to do. Then keep the document in your files for future reference.

Independent Financial Planning: Your Ultimate Guide to Finding and Choosing the Right Financial Planner can be purchased from www.amazon.com through all major booksellers