10 Best Questions to Ask a Financial Advisor in 2024

If you would like an advisor to manage your investments, it’s important that they have had experience through several market cycles, especially the 2008/09 great recession. It’s essential not to be their learning experience.

Fiduciaries are required by investment law to work in the best interest of the client. Non-fiduciaries, for example broker/dealer advisors, need only recommend products that are “suitable”, even if they are not the lowest-cost or ideal for you.

Advisors use a variety of fee structures. Fee-only advisors are in the minority; the term “fee only” is legally defined and helps avoid conflicts of interest as fee-only advisors are only paid directly by clients, with no other compensation. Fee-based advisors, on the other hand, can get a combination of fees from clients, product commissions, and other incentives. These fine-print hidden fees can significantly reduce your return. Just be aware the term “fee-based” was coined as part of an effective movement to confuse the two fee structures.

It’s valuable to know if an advisor has incentives to sell proprietary products of an affiliated company.

Beware of timing strategies. Although many such strategies show short-term returns superior to the market, long-term data show timing strategies inevitably lag the market significantly over the decades needed for retirement portfolios (Dalbar research statistics since 1976). Timing also leads to stress and worry – Should I get out now? When should I get back in? With all the frightening financial headlines, it’s important to have the reassurance and knowledge of an advisor with a long-term perspective.

Did they reassure clients to stay the course, or did they try to time them out of the market? If the latter, when did they reinvest in stocks? The overall market rose multiple times in the ensuing 5 years. It’s valuable to have someone who helps you stay in the market during downturns.

Was the advisor willing to say what they thought was best for the client, even knowing it might cause conflict or cost their business? This is at the core of their integrity. Performance research shows that the two top competencies of advisors that affect their clients’ portfolio performance are: 1) integrity and 2) client-service orientation. Surprisingly, technical competence is not a top factor, although it needs to be present at some level. [Ref. D. Lennick, Financial Intelligence, 2010 FPA Press]

Responses such as “honest”, “trustworthy”, “keep my promises”, or “do what’s right for them in the long run” also says something about their integrity

It is important to know your wealth will be kept with a safe, insured custodial firm, not the advisor’s account.

Will the advisor be accessible to you? How often will you be able to meet with them and are they available for phone calls or emails outside of scheduled appointments?