December 9, 2022


Fine Art Of Business

How To Shop For One| Investor’s Business Daily

4 min read

What are the most important questions to ask a financial advisor when you’re trying to decide which one to hire?


That’s something that a lot of U.S. adults want to know. Fifty-nine percent of them want financial advice but don’t know where to find it. So says a new survey by cloud-based technology platform intelliflo.

And knowing the right questions to ask a prospective advisor is a key to being able to select the right advisor, Michael Garry, founder and CEO of Yardley Wealth Management.

For their part, advisors are no doubt eager to help adults find professional assistance.

How to expand their businesses is precisely the sort of advice many advisors hope to receive as they attend the 34th annual Morningstar Investment Conference. The MICUS commences May 16 in Chicago. The industry get-together is aimed largely at advisors.

This year’s MICUS and last year’s were hybrids, conducted in-person as well as digitally. The 2020 Morningstar (MORN) conference was solely digital. In-person attendance for this year’s gathering was trending 48{6e6db3521f07ebedc52abc8c7bfbbc5a7fcd8802a2a8a5c8cfaa0d09c6ebceb7} higher than last year’s, as of last week, according to Morningstar. In-person attendance is expected to outnumber digital attendance by two-to-one.

Financial Advisor: How To Find One

Since financial advisors are ready and willing to help more clients, it’s up to prospective clients to ask reach out and shop for an advisor. They’re the ones with assets that can be enlarged with professional advice. They’re the ones with estates that can be protected by advisors’ insights.

Leading advisors suggest seven questions that prospects should ask prospective advisors as they shop for an advisor.

Follow The Money

How will you, the advisor, make money from me as a client? “If you know how a financial advisor will be paid, you know whether the advisor’s advice will be biased,” Garry said.

Garry is referring to the issue of whether an advisor earns commission from the sale of products, or instead earns a fee on assets under management or charges for their time or a specific product such as writing a financial plan.

Generally, a financial advisor who earns commissions is not acting as a fiduciary.

Fiduciaries are obliged to do what’s in your best interest, even if it means they make less money. A nonfiduciary only needs to do what’s suitable, not necessarily best, for you. “Whether or not someone is a fiduciary, there’s always potential for conflicts of interest,” said Andy Kapyrin, co chief investment officer of RegentAtlantic. “Knowing how someone makes money lets you understand the potential conflicts.”

What are the advisor’s qualifications? Not all credentials are the same. Some may be more relevant to your circumstances than others. “Look for someone whose skills match your needs and circumstances,” Garry said.

Who Would You Work With?

Who would be my primary contact at the advisory firm? Is it the person you’re interviewing? Or is he or she just a salesperson, but not the person who prepares plans and advice? If the person you’re interviewing is not your contact person, meet the contact person to see if you’re comfortable with them.

How long has the advisor been working? This bears on how much experience a financial advisor has. If you’re younger, it also bears on whether they will be around long enough to see you through your accumulation years as well as retirement and estate planning years.

Who is the advisor’s typical client? You need someone experienced with clients like you. “If you’re an high-ranking executive at a publicly traded firm, you have issues that are different from most people’s, including compensation,” Kapyrin said. “Your advisor should have experience with your issues.”

Do you like my portfolio? You’re really asking the financial advisor what the tax consequences would be of becoming his or her client. This matters if you’ve built a portfolio that includes securities the advisor does not like. If he would want you to sell stocks or funds that you’ve owned for years, you might get hit with a big capital-gains bill. “Do you want that? Can the advisor justify it?” Kapyrin asked.

What types of investments would you steer me to? “There’s no single best way to construct a portfolio,” Kapyrin said. “Make sure you understand what the financial advisor would put into your portfolio. And make sure you’re comfortable with it.”

Financial Advisor Background Check

In addition to asking a financial advisor questions, you should look up any advisor you’re considering at BrokerCheck, Kapyrin says. The site offers a snapshot of a broker’s employment history, regulatory actions and investment-related licensing information, arbitrations and complaints.

It is run by Finra, a brokerage-industry self-regulatory organization.

Similar information about investment advisors (RIAs) registered with the Securities and Exchange Commission (SEC) is available at the government’s disclosure website. Small advisors, such as those with less than $25 million of assets under management, register with states instead.

Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and strategies of the best mutual funds.


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