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Questions to Ask a Financial Advisor

Mar 11, 2022 | Everyday Finances, Financial Services

Young couple and financial planner discuss a list of important questions to ask a financial advisor

There is a lot at stake when you’re interviewing a financial advisor to guide your wealth decisions and help you achieve financial security. You want someone who possesses the knowledge, experience and qualifications you need at a price that’s reasonable, with a dialogue that’s meaningful to you.

SageVest Wealth Management offers 20 important questions to ask a financial advisor across four key categories, to help you make the best choice.



The Advisor and the Firm

1) Are you a fiduciary?

Fiduciary advisors must, BY LAW, always work in their client’s best interest. If an advisor is not a fiduciary, this means that the advice you receive might not align with what’s best for you, and could be influenced by commissions or other factors.

2) What credentials do you hold?

Credentials among advisors vary. The most common include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and Chartered Financial Consultant (ChFC). Each SageVest advisor holds the CFP ® designation.

3) How much experience do you have?

Your advisor should have adequate experience to wisely guide you through various life decisions and changing market conditions.

4) Will I be working with you on a long-term basis?

An advisor who gets to know you well can better understand your unique financial needs. Larger firms often rotate client relationships among advisors. Ask how long clients typically work with the initial advisor assigned to the relationship, or consider a smaller firm.

5) How often will we communicate?

Ask how frequently you’ll meet or hear from your advisor. Ideally, they’ll be proactive in contacting you, but will also welcome your questions.

6) How many clients do you have?

Your advisor’s workload can dictate the level of service you receive. Too few clients could indicate a new and unseasoned advisor. Conversely, an advisor with too many clients might be hard-pressed to offer the time and guidance you deserve.

7) Has your firm or anyone in your firm ever been subject to disciplinary or legal actions?

A yes could be a distinct warning sign.


8) What are your fees?

Fee arrangements vary widely. Ask how fees are calculated and how your advisor is compensated.  Fee-only advisors are compensated directly by the client. Fees are transparent, and the advisors don’t receive any hidden compensation for the advice they render. Advisors who are fee-based not only collect a fee from the client, they also accept commissions and compensation from the products or services they recommend.

SageVest Wealth Management is structured as a fee-only advisory firm.

9) Do you receive any commissions or incentives?

It’s important to understand if your advisor receives any commissions or incentives that might influence their advice. As an independent advisor, SageVest Wealth Management receives no commissions. Our advice is unbiased.

10) What services are included in the fee?

Some advisors are solely money managers, focused on investments. Others are financial planners who don’t offer investment advice. Wealth managers aggregate these two services to support all your financial needs.

11) Do you report investment performance net of fees?

Ask if investment figures are reported net of fees to more accurately reflect performance.

Investment Management

12) What is your investment philosophy?

Ask an advisor to explain the firm’s investment philosophy in terms you can understand. Some key points include:

a. Diversification: Some advisors are multi-asset class managers, meaning that they incorporate exposure to an array of diversified stocks and bonds. However, others tend only to invest in what they know e.g., only large US companies. Portfolio diversification is essential to enhancing your returns while also reducing your risk over time.

b. Growth vs. Value: Sometimes, managers favor growth over value stocks. These investments will outperform or underperform, depending on the market climate. If only one style is favored, you could see your portfolio’s performance exceed or trail the markets at different times.

c. Types of Investments: Advisors may invest in mutual funds, index positions, individual securities, annuities, or other. Ask about the fee structures for each and the level of investment diversification achieved.

d. Market Timing: Finally, and perhaps most importantly, ask if the manager tries to time the markets. This is where the investment advisor tries to call or time a market top or bottom, and recommends a portfolio shift based upon a market ‘hunch’. Studies have repeatedly shown the dangers of market timing, as calling the markets wrong can prove very costly.

13) How will you determine my asset allocation?

This is a great question to ask, as it really gets to the heart of whether you’ll receive personalized attention. If an advisor states that all clients hold the same allocation, or they offer an allocation without knowing much about your finances, this is a point of concern. Ideally, they should only offer investment advice after exploring your current finances, long-term goals, and risk tolerance.

14) Will I have to sell everything I own, even if there is a tax impact?

If you own investments outside of an IRA or other tax-qualified account, ask if the advisor requires you to sell everything and purchase selected investments. Doing so could result in taxable capital gains.

15) How often will my investment accounts be reviewed and repositioned?

Ask how frequently your investments will be formally reviewed – once per month, quarter, annually, etc.

16) Where will my assets be held?

Knowing who holds or custodies your assets is important. Many advisors use a third party custodian such as Charles Schwab or Fidelity. Doing so provides a checks-and-balances system to avoid potential improper accounting.

Financial Planning

17) What is included in your financial planning services?

Some financial advisors only provide retirement planning services, whereas others address all areas of financial planning e.g., taxes, asset protection, estate planning, college funding, etc.

18) Are there additional fees for financial planning?

Find out if you have to pay extra for financial planning services, and if so, the cost. Planning ahead is an important and ongoing aspect of your financial success. Additional fees might dissuade you from engaging in financial planning on a recurring basis.

19) How often will my financial plan be updated?

Sometimes a financial plan is only prepared at the onset of your relationship. SageVest incorporates full planning updates on a recurring basis.

20) Does planning software use an effective tax rate?

Some financial planning software programs include detailed tax planning, based upon specific income and tax facts that your advisor inputs each year. However, many programs utilize an effective tax rate, which holds your taxes at a constant percentage, regardless of changes in your income or deductions. This can lead to grossly inaccurate planning results.

If you’re thinking about hiring a wealth advisor, we recommend you begin with our tips on ‘How to Find the Best Advisor for You’. Ask every potential advisor the same set of questions (as above) to ensure fair comparison and to help you achieve an informed decision. You can print the list here of 20 Questions to Ask a Financial Advisor.

SageVest Wealth Management proudly serves as an independent, fee-only, fiduciary advisor to individuals, families and business owners who care about making smart financial decisions with counsel they can trust. We have consistently been ranked as a Top Financial Advisor in Washington, DC and Northern Virginia and enjoy helping individuals secure their financial futures. Please contact us to learn more.

Prepared by SageVest Wealth Management. Copyright .
Standard Disclosure

The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This article is for informational purposes only. The views expressed are those of SageVest Wealth Management and should not be construed as investment advice. All expressions of opinions are subject to change and past performance is no guarantee of future results. SageVest Wealth Management does not render legal, tax, or accounting services. Accordingly, you, your attorneys and your accountants are ultimately responsible for determining the legal, tax and accounting consequences of any suggestions offered herein.

In accordance with IRS CIRCULAR 230, we inform you that any U.S. Federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of (a) avoiding penalties under the Internal Revenue Code or that may otherwise be imposed on the taxpayer by any government taxing authority or agency, or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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Make a wise investment in your future today.