3 Questions to Ask When Hiring a Financial Adviser

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Managing your finances can be a challenge. You can attempt to manage your finances by yourself, but if your financial portfolio is large, you’re better off enlisting the services of a professional, such as an investment adviser or financial adviser. There is a difference between the two that you should understand. The U.S. Securities and Exchange Commission (SEC), which regulates the stock brokerage industry, defines an investment adviser as someone who gives professional advice about financial securities. Meanwhile, a financial planner may perform the work of an investment adviser, but financial planners typically cover other financial areas including insurance, taxes, and retirement and estate planning.

Most financial planners are investment advisers, but not all investment advisers are financial planners. In most cases, a financial planner can offer more comprehensive services and help you coordinate your finances with any other investment advisers you may be working with. The main difference between the two is a matter of fiduciary. Investment advisers have a fiduciary responsibility to their client, meaning, they hold the best interest of the client, not their own personal gain. Don’t rush the process of selecting someone though, or it could wind up being a regrettable mistake. Do some research into their background, experience, credentials, and professional licenses and certifications.

Here are three questions to ask when shopping for a financial adviser:

#1 What’s Their Level of Expertise?

One of the first things to understand when searching for a qualified financial professional, therefore, is whether they are merely authorized to buy and sell stocks and bonds or if they have more extensive knowledge and expertise. You’ll want to find out about their formal education, their membership in professional organizations, and what certifications or licenses they hold. Did you know that many financial planners do not even come from a financial background? They may not have studied finance, economics, accounting, or business in college because many people in the profession migrated there from another career. You should also ask if they are officially registered with financial oversight agencies such as those at the SEC and those within your own state government. Or, if you’re in detective mode, do your own background check.

#2 Who Pays their Salary?

Everyone is motivated to some extent by money – otherwise you would not be in the market for financial advice. Who pays your adviser is important, too, because that may influence the nature of the advice they provide. Many stock brokers, for example, earn added incentives for selling products marketed by the companies that pay their salaries. They may still be objective about recommending stocks for you to buy, but then again, their advice could be biased. Many consumers prefer to work with an adviser who has no preference for one specific company’s portfolio of investment products.

Now you need to understand how they charge you. Is it a flat hourly fee the way attorneys typically do? If so, is that fee negotiable? Maybe they earn money in a combination of ways. Regardless of how they are compensated, you should feel comfortable asking them about these things so that you can make a more informed decision. Get these topics out of the way up front to ensure a more transparent relationship. Confidence in your financial adviser is critical, because you’re about to trust them with the future of your finances.

#3 What Certifications Do They Hold?

Some financial advisers hold Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designations. Federal and state laws don’t require these additional credentials, but they do show that the financial adviser is committed to high ethical standards, has experience and has passed a rigorous financial exam. Only about half of the people who take the CFP exam pass it, for instance, and those who do must also complete 30 hours of continuing education every two years.

These professional credentials are monitored by the Certified Financial Planner Board of Standards (CFB), and if the credentials have been suspended or revoked – or if disciplinary actions have been taken against a member of the organization – then those records will be on file at the CFB. To double check credentials visit the website of the Certified Financial Planner Board of Standards, or call (800) 487-1497. You can also find more information about professional standards at the website of the Financial Industry Regulatory Authority.

Last But Not Least

After completing your research, create a short list of candidates and interview them in person to ensure they have great communication skills. Face to face meetings are essential. After all, you’ll be discussing complex issues with your financial adviser that will have a profound impact on your financial life. Personal rapport is the key to a rewarding professional relationship with a financial planner or adviser. Trust your instincts and only hire someone if you feel completely at ease talking to them and are satisfied that they are able to answer all of your questions in a clear, and understandable way.

Tom Kerr writes for the blog at Comparecards.com in addition to others. He has been an avid writer for many years, even winning awards for work he’s done.


  1. I would want to know about their own financial situation. Credibility is important to me.

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