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Questions To Ask Financial Advisors

Just like all restaurants don't serve the same food, all financial advisors don't provide the same services, get compensated the same way, or serve the same type of clients.

Whether you're already working with a financial advisor or evaluating prospective advisors, asking the following questions should provide clarity and confidence you're working with an advisor perfectly suited to serve your unique needs:

1. Are you a fiduciary?

In short, a fiduciary is required to act in the best interests' of their clients. Most advisors are not held to this standard because of the way their firm is registered.

2. Are you willing to state your fiduciary status in writing?

3. Is your firm independent?

Independence enables autonomy and flexibility to seek best-in-class solutions for clients.

4. Are you beholden to propriety products or solutions?

Some advisors may earn more by recommending proprietary products over others.

5. How are you compensated?

Financial advisors can be compensated in a number of ways. Commissions, kickbacks, sales contests, and a % of your assets can all be ways an advisor is compensated. We believe the most transparent and fair arrangement is through a flat-fixed fee paid directly by the client.

6. How do your fees compare to industry averages?

If you're paying above-average advisory fees, what are you receiving in return?

7. Can you show me every fee/expense that I would pay if I chose to work with you?

One of the most overlooked aspects of investing are the fund expenses. If your weighted-average fund fees are greater than 0.50%, you're likely paying too much. Also consider asking your advisor about transaction fees and other product charges.

8. Do you earn or pay referral fees?

Some advisors pay for your business. Others are incentivized to refer you to certain professionals in exchange for a referral fee.

9. Do you share revenue with anyone else?

Some advisors may have incentive to invest in certain funds that will provide the advisor a kickback.

10. Do you receive commissions of any kind?

Commission-based compensation can increase the likelihood that a conflict of interest exists.

11. What type of clients do you serve?

Aligning with an advisor that serves clients like you will ensure their expertise matches your unique needs.

12. What is your investment philosophy?

Regardless of the advisor's investment philosophy, make sure you understand what you own and why you own it.

13. How do you manage risk?

There are a number of ways to manage portfolio risk, but we believe the most prudent way for most investors is through asset allocation and diversification.

14. Do you believe you can beat the market?

The SPIVA report shows almost no one has reliably or consistently been able to beat the market through security selection, timing the market, or other active management strategies.

15. How often do you trade?

Excessive trading can lead to increased costs and tax liability.

16. What services can I expect to receive?

Some advisors will only manage your portfolio, while others will work with you on tax planning, estate planning, and other financial planning topics.

17. What credentials do you have?

Not all credentials are created equally. Some credentials require a 60-minute test, while others like the CFP® require years of rigorous education and tests, experience requirements, and ethics requirements.

18. How do you manage your own money?

Does the advisor practice what they preach?

19. Can you tell me about your conflicts of interest?

The financial services industry is notorious for conflicts of interest. Make sure you're aware of the conflicts of interest that may exist for the advisor.

20. Do you have any disclosure events?

A disclosure event is any legal or disciplinary action that must be made public.


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