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5 Questions to Ask Every Financial Planner

Written by: Jon Mitchell Jackson

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Posted almost 3 years ago. 0 helpful votes, 0 comments

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Times are difficult

We’re all experiencing difficult economic times. More than ever, careful financial planning and smart decisions will help you and your family survive this turbulent fiscal crisis over the long-term.

Be Smart and ask all the right questions

The good news is that throughout history, economic recession is always followed by economic boom. Smart investors who take proper action today will be able to maximize their investment returns and provide for a safe financial future. When interviewing a financial advisor, references and regulation violations are a good place to start. But how can you tell if she will put your interest first? Is there any way you can determine if she’ll chase market trends or instead, advise you based upon your unique investment interest and goals. Here are 5 things you need to ask every financial planner you are thinking about hiring. Putting a prospective planner’s frankness to the test will give you insight into her style, candor and honesty.

1. Have you made any mistakes over the past 5 years and if so, what was your biggest mistake

Listen carefully to her answer. Will she admit to errors or mistakes? If so, can she tell you what she learned from those mistakes? Everyone makes mistakes—even Warren Buffett. Your prospective advisor’s answer to this single question will tell you a great deal about her character and honesty.

2. Are there any conflicts with your financial incentives and my best interest

The fact of the matter is that all payment models create some level of inherent conflict. And that’s normally OK so long as these conflicts are fully disclosed to you. Even hourly fees and percentage of assets formulas can create conflicts. The important factor to pay attention to is whether or not your adviser up front and honest enough to share all of these conflicts with you.

3. How have your clients’ portfolios performed over the past 10 years

Listen carefully to the answer to this question. “I provided focus and discipline to allow my clients to earn market returns” is the type of answer you should be looking for. Answers such as, “I outperformed the market” only tells you she’s trying to time the market which will add to your fees and lower returns.

4. If I wanted to buy several broad index funds or ETFs, which would you recommend

Because an expensive index fund has no chance of outperforming a lower-cost equivalent index fund, her answer to this question may give you a glimpse into her priorities and show where your interest fits in. If your prospective planner suggest an S&P 500 or total index fund with an expense ration of 0.5%, your aren’t coming first.

5. Can you give me 7 references and 7 testimonials

When asked, most financial experts (and professionals in general for that matter) will tell you they know their stuff and are good at what they do. And that’s great! But why not independently confirm this information with your prospective advisor’s clients. Most honest, ethical and successful financial advisors can and look forward to sharing the names and numbers of 7 existing clients who you can, and should, contact for honest and direct feedback. If a prospective advisor is unable to provide you with such a list, either hold off hiring her until she does or, take your business someplace else. Referrals- We have friends and professional acquaintances who offer outstanding financial planning services. Please feel free to contact us for a referral.