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How To Interview Financial Advisors

Looking For Someone To Handle Your Investments?

Ask Ten Questions, Three Times.

by Scott Woolgar

When you hire an investment advisor, you are literally putting your future in another person's hands. It's best to move cautiously.

You'll probably start with a referral from a trusted friend, then meet with the prospective advisor to make sure there's a good chemistry. But no matter how many good things you hear about an advisor, or how good you feel when you meet, there are no shortcuts to an informed decision.

We recommend a full round of due diligence before you turn investments over to anyone. That means subjecting three different candidates to the same careful process.

Here are ten questions to ask as you interview prospective financial advisors:

  1. What experience do you have?

    Ask the advisor to describe his experience in dealing with portfolios of your size and scope. Keep in mind that experience means more than a high number of clients: it also means education, years in the business, and performance. Ask what other firms the advisor has worked for.

  2. Have you ever been disciplined for unethical or unlawful conduct?

    Don't be afraid to ask this question outright. Then follow up with the Financial Industry Regulatory Authority (FINRA), which maintains a disciplinary history of most financial planners and advisers. Most advisors are honest and ethical, but more than a few have been involved in arbitration cases, especially in dynamic economies. Better to know now.

  3. What is your investment philosophy?

    Find out how the prospective advisor plans to handle your account through thick – and thin – times. Your advisor should be able to knock this answer out of the park with sincerity and intelligence. If not, beware. Some planners begin by aggregating all your financial goals. Others prefer to offer advice on specific topics on an as-needed basis. Make sure there's a fit between your long-term goals and the advisor's long-term strategy.

  4. Who is your typical client?

    Ask about the advisor's client list, and ask if you can have the name and contact information of a few clients for referrals. Then follow up by asking about the advisor's favorite type of client. Who does the advisor really like working with? People with lots and lots of money to invest? Or people with a little to invest, where great advice can make the most difference? Whom should I call about my monthly statement of accounts? The best answer here is “me.” For many investors, the monthly statement can be more confusing than enlightening. In fact, many times an investor will simply glance at the bottom line number and throw the statement into a drawer (or wastebasket). A trustworthy advisor is happy to take your calls, and explain anything you don't understand about the monthly statement. You can learn a lot about a financial advisor by her willingness to field questions.

  5. Do you plan to buy or sell stocks without discussing them with me first?

    Some investment firms have a standing policy regarding buy and sell orders. If you want to take an active role in your investment strategy – and we recommend that you do – make sure your prospective advisor welcomes your participation.

  6. How do you make money from my investments?

    Find out about commission structures, sales charges, or “loading” fees that may occur on the investments your advisor recommends, sells, or buys on your behalf. There also may be sales contests or other incentives at play, and you'll want to know that from the inception of the relationship.

  7. Will you be the only person working on my account?

    In large firms, it's not uncommon for several advisors to share different client duties. You'll want to know if you're talking to “your” person, or one member of a team.

  8. What services do you offer?

    The services a financial planner offers depend on credentials, licenses, and areas of expertise. The services offered can also depend on the firm's philosophy, and its embrace of other investment-related professions such as estate planning or tax consultation. Make sure your advisor is focused on the job you're asking him to do.

  9. What questions should I ask that I haven't asked already?

    Sometimes the best approach to fact-finding is to ask what the advisor thinks you need to know. Asking the prospective advisor to put questions in your mouth, then answer them, is another great way to find out about that individual's approach to customer service. Probably the least satisfying answer to this question is “I can't think of a thing: you've asked all the right questions.”

Reach us at 800-505-5515, or email us.

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