Choosing a financial advisor is one of the most important decisions you’ll make. This person will have access to your financial information, influence your investment decisions, and potentially shape your family’s financial future for decades.
Yet many people spend more time researching which car to buy than which advisor to hire.
Over the years, I’ve talked with families who learned difficult lessons about what happens when you don’t ask the right questions upfront. Hidden fees that compound over time. Conflicts of interest that weren’t disclosed. Promises about services that never materialized.
The good news is that a thoughtful interview process can help you avoid these problems. The questions you ask before hiring an advisor reveal whether they’ll put your interests first or their own.
Let me walk you through the essential questions that protect your wealth and help you find an advisor who truly serves your needs.
Why the Interview Matters
According to research from HSBC, 55% of investors who work with a financial advisor saved more for retirement than they would have on their own. The National Study of Millionaires found that 68% of millionaires worked with an investment professional as they built their net worth.
Working with the right advisor can make a meaningful difference. But the emphasis is on “right advisor.”
Not all advisors operate under the same standards. Some are legally required to put your interests first. Others only need to recommend products that are “suitable” for you, even if better options exist.
Understanding these differences before you hire someone is important for protecting your financial future.
The Fiduciary Question: Start Here
This may be the single most important question to ask any advisor you’re considering:
“Are you a fiduciary 100% of the time, and can you provide that in writing?”
This matters because a fiduciary is legally obligated to put your interests ahead of their own. The Securities and Exchange Commission defines this as having both a duty of care and a duty of loyalty to clients.
The duty of care requires advisors to thoroughly understand your financial situation, goals, and risk tolerance before making recommendations. They must research investment options diligently and provide advice grounded in accurate information.
The duty of loyalty requires advisors to put your interests first and not favor their own interests over yours. They must make full and fair disclosure of all material facts relating to the advisory relationship.
This fiduciary standard reflects what the Supreme Court called “the delicate fiduciary nature of an investment advisory relationship” and Congressional intent to eliminate conflicts of interest that might lead to advice that isn’t truly disinterested.
Where it gets complicated is that many advisors are what the industry calls “dually registered” or “fee-based.” These advisors can take their fiduciary hat on and off.
One day they act as a fiduciary putting your interests first. The next day they can sell you an insurance product or investment with hidden fees and commissions, operating under a lower standard called “suitability.”
The suitability standard only requires that recommendations be appropriate for your financial situation. It doesn’t require the advisor to act in your best interest or to recommend the lowest-cost option.
According to financial planning expert Taylor Schulte, CFP, most advisors who claim to be fiduciaries are actually dually registered and are not fiduciaries 100% of the time.
When you ask about fiduciary status, listen carefully to the answer. If they hedge or explain that they’re a fiduciary “sometimes” or “when acting in an advisory capacity,” that can be a red flag. You want someone who always puts your interests first, not just when it’s convenient.
Understanding Compensation: Follow the Money
The second critical question is:
“How are you compensated, and are there any other ways you make money from my relationship beyond your stated fees?”
How an advisor gets paid reveals potential conflicts of interest. There are several compensation models.
Fee-Only Advisors
Fee-only advisors are paid directly by clients, either as a percentage of assets under management, hourly rates, or flat fees for specific services. They don’t receive commissions from product sales.
This model aligns the advisor’s interests with yours. They make money when you pay their fee, not when they sell you something.
Commission-Based Advisors
Commission-based advisors earn money when they sell you products. This creates potential conflicts because they’re financially motivated to recommend products that pay them commissions, even if lower-cost alternatives might serve you better.
Some commission-based advisors advertise “free” advice, but you might pay through product fees and commissions. These costs are often less transparent but can be significant over time.
Fee-Based (Not Fee-Only)
Fee-based advisors charge fees but may also receive commissions. This hybrid model can create confusion about how they’re really being compensated and where their loyalties lie.
According to research from NerdWallet, most financial advisors charge based on how much money they manage for you, with fees typically around 1% annually, though rates can vary.
Ask for complete transparency. Request a written breakdown of all fees, including management fees, transaction costs, fund expenses, and any commissions or compensation they receive from third parties.
If an advisor seems reluctant to provide clear answers about compensation or if the fee structure seems unnecessarily complex, consider that a warning sign.
Experience and Qualifications
Not all financial advisor credentials are created equal. Ask these questions to understand their background:
“What are your professional credentials, and what do they require in terms of continuing education and ethical standards?”
For example:
Certified Financial Planner (CFP) professionals must complete extensive education, pass rigorous exams, and commit to ethical standards including fiduciary duty. According to the CFP Board, this designation indicates a commitment to putting clients’ interests first.
Chartered Financial Analysts (CFA) have deep investment knowledge and are also held to fiduciary standards.
Other advisors might have basic licenses that allow them to sell certain products but don’t require the same level of education or commitment to client-first service.
“Who are your typical clients, and do you have experience with situations like mine?”
You want an advisor familiar with your type of situation. If you’re a business owner, find someone with business owner clients. If you’re approaching retirement with complex estate planning needs, look for that experience.
According to Edward Jones research, advisors with career experience outside financial services can often offer more specific insight relevant to your situation.
Investment Philosophy and Strategy
Understanding how an advisor approaches investing helps you determine if you’ll be comfortable with their strategy.
“What is your investment philosophy, and how do you construct portfolios?”
As NerdWallet points out, it’s important that you and your advisor align on investment style. If you believe in socially responsible investing, make sure they can accommodate that. If you prefer active management over passive index funds, or vice versa, ensure they’re comfortable with your preference.
“How do you handle down markets, and what would you do if my portfolio dropped significantly?”
When markets decline is when advisors really demonstrate their value. You want someone who can help you stick to your plan during volatility rather than panic and make emotional decisions.
“How do you measure success, and what benchmarks do you use?”
Your advisor should define success in terms of helping you achieve your specific goals, not just beating market indexes. They should track progress and communicate it clearly.
Service Model and Communication
Understanding how you’ll work together prevents frustration down the road.
“How often will we meet, and how do you typically communicate with clients?”
Most people connect with their advisor quarterly for updates, with at least one formal annual review. Find a communication frequency and style that works for you.
Some advisors prefer in-person meetings. Others use video calls or phone conversations. Make sure their approach matches your preferences.
“What services do you provide beyond investment management?”
Look for advisors who consider your complete financial picture, not just investments. This includes tax planning, insurance needs, estate planning, and real estate decisions.
The best advisors coordinate all aspects of your financial life rather than treating investments in isolation.
“Do you have a team, and who will I work with day-to-day?”
Some advisors work independently. Others are part of larger firms with teams and resources. Understanding the structure helps set appropriate expectations.
“What happens if you’re unavailable or retire? Is there a succession plan?”
Your financial relationship might last decades. Understanding continuity planning protects you if circumstances change.
Checking References and Background
Never skip this step.
“Have you ever had any regulatory complaints or disciplinary actions?”
You can verify this yourself through the Financial Industry Regulatory Authority (FINRA) BrokerCheck website or the SEC’s Investment Adviser Public Disclosure database. These free tools show an advisor’s professional background, credentials, and any reportable infractions or client complaints.
According to Covenant Wealth Advisors, checking these databases is essential before hiring any advisor. If you find compliance disclosures or disciplinary history, ask direct questions about what happened and how it was resolved.
Red Flags to Watch For
During your interview, be alert for these warning signs:
Guarantees About Returns
No legitimate advisor can or should promise specific investment returns. Markets are unpredictable. Anyone guaranteeing results is either misleading you or doesn’t understand risk.
Pressure to Make Quick Decisions
Legitimate advisors give you time to think and don’t pressure you into immediate action. High-pressure sales tactics could suggest the person is more focused on their own commission than your wellbeing.
Overly Complex Explanations
Good advisors explain complex topics in simple terms. If someone can’t explain their strategy clearly or hides behind jargon, that’s concerning. You should understand what you’re investing in and why.
Reluctance to Provide Written Information
Everything should be documented in writing. Fee schedules, investment strategies, services provided, all of it. If an advisor is hesitant to put things in writing, that’s a major red flag.
Conflicts They Won’t Discuss
All advisors face some conflicts of interest. Honest advisors disclose them upfront and explain how they manage them. Advisors who claim they have no conflicts or who dismiss the question aren’t being transparent.
Questions About Your Situation
A good interview isn’t one-sided. The advisor should ask you thoughtful questions about your situation, goals, and concerns.
Effective advisors ask detailed questions about your immediate needs, short and long-term goals, risk tolerance, and financial situation. They should want to understand your full financial picture, including assets not directly invested with them like employer 401(k)s or real estate.
If an advisor doesn’t ask many questions about you or seems to have a one-size-fits-all approach, that’s concerning. Your financial plan should be customized to your specific circumstances.
Making Your Decision
After interviewing several advisors, give yourself time to reflect. Compare not just what they said but how they said it.
Did they listen more than they talked? Did they explain things clearly? Did you feel comfortable asking questions? Did they seem genuinely interested in understanding your situation?
Trust your instincts while also evaluating the objective factors. The right advisor should have appropriate credentials, transparent fees, a fiduciary commitment, relevant experience, and a communication style that works for you.
Don’t let anyone rush you into a decision. This relationship is too important to enter without confidence.
The Bottom Line
The questions you ask before hiring a financial advisor can save you significant money, stress, and disappointment over time.
Most families we work with had previous advisor relationships that didn’t work out. Common problems include a lack of communication, hidden fees, recommendations that seemed more beneficial to the advisor than the client, and strategies that didn’t align with their actual goals.
These problems are often preventable through a thorough interview process.
Your family’s financial security deserves someone who will put your interests first, communicate clearly, provide transparent pricing, and have the expertise to guide you through complex decisions.
We don’t run our business on autopilot, and you shouldn’t accept autopilot service from your advisor either.
Take the time to ask these questions. Listen carefully to the answers. Check regulatory records. Make sure you understand exactly what you’re getting and what you’ll pay for it.
The interview might feel uncomfortable, but it’s far less uncomfortable than discovering years later that you hired the wrong person.
Sources
Summit Financial, LLC has no affiliation with these entities.
- HSBC – “The Future of Retirement”
https://www.sgmoneymatters.com/wp-content/uploads/2013/05/HSBC-The-Future-Of-Retirement.pdf - NerdWallet – “10 Questions to Ask a Financial Advisor”
https://www.nerdwallet.com/article/investing/10-questions-ask-financial-advisor - Edward Jones – “Questions to Ask a Financial Advisor”
https://www.edwardjones.com/us-en/working-financial-advisor/questions-ask-financial-advisor - Define Financial – “The 7 (Most Important) Questions to Ask a Financial Advisor”
https://www.definefinancial.com/blog/best-questions-to-ask-financial-advisor/ - SmartAsset – “11 Questions to Ask a Financial Advisor”
https://smartasset.com/financial-advisor/questions-to-ask-a-financial-advisor - Covenant Wealth Advisors – “7 Powerful Questions To Ask a Financial Advisor in the First Meeting”
https://www.covenantwealthadvisors.com/post/questions-to-ask-financial-advisor-first-meeting - U.S. Securities and Exchange Commission – “Commission Interpretation Regarding Standard of Conduct for Investment Advisers”
https://www.sec.gov/files/rules/interp/2019/ia-5248.pdf - U.S. Securities and Exchange Commission – “Regulation Best Interest and the Investment Adviser Fiduciary Duty”
https://www.sec.gov/newsroom/speeches-statements/clayton-regulation-best-interest-investment-adviser-fiduciary-duty - SmartAsset – “Fiduciary Duty vs. Suitability Standards”
https://smartasset.com/financial-advisor/fiduciary-vs-suitability - Kitces.com – “Takeaways From SEC’s Staff Bulletin On RIA Standard Of Care”
https://www.kitces.com/blog/ria-standard-of-care-fiduciary-duty-sec-reg-bi-investment-due-diligence/ - World Advisors – “Are All Financial Advisors Fiduciaries?”
https://worldadvisors.com/blog/employer/are-all-financial-advisors-fiduciaries
This information is for educational purposes only and is not intended as investment, tax, or legal advice. Past performance is not indicative of future results. Investment advisory services offered through Summit Financial, LLC, a SEC Registered Investment Advisor.
