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Interview Questions for Financial Planners

Because financial planning covers a lot of ground, it can be hard to find the right match of skill and service to meet all of your needs. But if you enter the relationship with the right expectations, and then ask the right questions, you are likely to come away with an advisor you can trust for a lifetime.

Your First Meeting

Here are the questions you will want to answer as you go about selecting and working with a financial planner.

Do you have experience in providing advice in

Make a list of everything that is important to you, every concern or issue that has you ready to hire a financial advisor. Stack them up and click them off.

Does the advisor have experience in retirement planning? Investment planning and portfolio management? Tax planning? Estate planning? Insurance planning? Cash-flow and household debt management? College planning? Integrated planning?

Whatever you think you will need, start the interview by asking if the advisor does it and how many years he or she has been doing it for. If he tells you, for example, that he is new to insurance planning, then you will need to decide if you want him involved in that facet of your overall plan, compared to an insurance agent who is a real specialist.

If the advisor doesnt have experience doing the things you feel you need the most, youre interviewing the wrong person.

Smart Investor Tip

If the advisor doesnt have experience doing the things you feel you need the most, youre interviewing the wrong person.

What is your role? What is your approach to financial planning?

Now you have a mental picture of what the advisor is capable of doing, but every advisor has his or her own vision for how he or she likes to work with clients. You may want just a fiscal physical, a snapshot of where you stand now and what actions you must take to reach your long-term goals, or you may want to hire someone to move your money into specific investments that will lead to a lifetime of financial security. There are advisors to fit each of those roles; sometimes one person is willing to work either way, sometimes she only does things her way.

One of the very best planners I know is a woman named Sharon, who works only on an hourly basis, developing plans; she leaves implementation of the plan to the client. That doesnt frustrate her clients because she tells them up front that they are responsible for putting the plan into action. If they are not confident, in advance, that they can properly execute the transactions, implement the plan and get their moneys worth from her advice, she suggests they hire someone else.

Plenty of people using the title of financial planner are more like money managers, interested mostly in your portfolio and managing your stocks, bonds, and mutual funds. If you are looking for an active day-to-day manager of your financial affairs, you want to make sure youre not getting someone who is mostly interested in executing trades. Since the generic titles of financial planner, investment advisor, or wealth manager cover such a vast territory, make sure you know what the advisor is talking about when applying his or her services to your situation.

Selecting investments should be a small part of a planners role; if the only reason you want to hire an advisor is to get the names of good mutual funds, chances are you are paying too much money for a service that will let you down the first time any fund pick fails to pan out. Worse yet, an advisor whose role is defined as picking investments can be made obsolete at little or no charge by any number of websites, magazines, or computer software programs. Or you can go to a broker or money manager and get services that are more tailored to your specific needs.

Whether you are seeking periodic check-ups plenty of planning clients see their advisors once every two years after an initial consultation sets them on the course toward their goals or an active day-to-day manager of your affairs, the planner needs to either work the way you want, or must convince you of how his or her preferred role will work out properly for you.

This is one of the key reasons why you interview multiple candidates.

Years ago, Walter R. one of my friends and colleagues at the Boston Globe, asked me to recommend a financial planner; I would not give one name and pick an advisor for him because the selection process is so personal but instead gave them the names of several candidates to interview. Walter interviewed three candidates before making his selection; afterwards, he came to me and said, I talked to three different people about working with me and, from the sounds of it, each of them looked at me as a completely different type of job.

You know the job you want done, and the advisor knows the job he or she prefers to do; make sure those jobs are actually one and the same.

What is your responsibility to me?

This is all about where your interests lie in comparison to the advisors personal interests in you as a client.

Legally, if you are dealing with a registered investment advisor, he or she must uphold a fiduciary standard, meaning that he or she must act in your best interests at all time. By comparison, a broker functions under a suitability standard, meaning he or she must only give advice that is appropriate. When someone who has the legal standing of a broker functions in almost every way like a financial planner but does not have the fiduciary requirement there is tremendous potential for conflict of interest. The advisor can suggest moves that are appropriate for you, but particularly good for him or her, such as putting you into the financial product that provides the biggest commission.

As the planning industry has moved toward a fiduciary standard (see Chapter for a discussion of this concept), the number of planners who must put your interests ahead of their own has grown. With titles being practically meaningless, however, you always must ask whether the advisor plans to act like a fiduciary. Any advisor who claims to be a fiduciary should be willing to sign a pledge to that effect, confirming that your interests come first.

Fiduciary Is an Imperfect Safeguard

Plenty of people in the industry and in Congress want to see a fiduciary standard applied universally to all stripes of advisors, thinking it will resolve conflict of interest issues.

No legal standard will stop an advisor from becoming a crook. Ive interviewed plenty of advisors who were working under a fiduciary standard, and who broke it and the law by stealing client funds or selling fraudulent investments.

If someone is sufficiently desperate to turn to crime, he or she wont be dissuaded by the responsibility to put your interests first. Even if this person doesnt go all the way to theft and fraud, there are plenty of cases where an advisor could act in a way that looks like your best interests at heart, but which is designed, first and foremost, to maximize the advisors payday. Customers must always be vigilant, even if they are working with a fiduciary.