Are you a registered investment advisor or a broker/dealer?

Investment Advisors earn a fee for advice or as a percentage of assets under management. Broker/Dealers earn money from commissions on transactions.  Would you rather pay someone for creating a financial plan for you and for them to make sure you stay the course, or have someone get paid only when they are selling you something that may or may not align with your needs?

How are you compensated?

Do you earn a fee for advice, or are you profiting from transactions generated from selling products?  This ties into how the person is registered.  When commissions come into play, there may be a conflict of interest.   Be very aware of what you are being sold and how it might benefit you, not the person selling it.

What are your qualifications?

There are many types of designations that can be attained by taking tests or college curriculum.  The Certified Financial Planner (CFP) designation is the most widely recognized due to its requirements for college courses, a thorough exam, application for approval to use the designation, and continuing education requirements.  If someone has letters after their name, do some research online to see what those letters mean and what requirements they had to meet in order to use them.

Have you ever been disciplined for any unlawful or unethical actions in your professional career?

Following the link provided below can let you know if you are dealing with someone who has been in trouble in the past.  Look for anything involving fraud to make sure the person you are talking to has always treated their clients in the proper manner in the past.  They should take protecting your life savings, helping to plan for your future, or any other financial planning issue as seriously as you do.  Their ethical standards will help gauge that determination.

Who will be holding my assets?

Reputable advisors will use a third-party custodian to hold their clients’ investments.  A client will never deposit money with the advisor, but rather a clearing firm who has Securities Investor Protection Corporation (SIPC) insurance.  This divide between the advisor and the clients’ assets is in the best interest of the client.

What services do you offer?

Investment Management, Financial Planning, Estate Planning, and Tax Advisement are some examples of services that might be offered by an advisory firm.   If the firm does not offer all of these services, then you should ensure that they will work with you to refer you to someone who can help based on your needs. Once again, this is about helping you to meet your needs and coming up with a plan that works best for you, the client.

What is your investment approach?

Are you trying to protect and grow my assets or grow them no matter the risk to the downside?  We all have different goals for the future.  Make sure your goals align properly with the person you are working with.  If you plan on living on your savings in the near future, a growth manager may not be what you are looking for.  At this stage in your life, protecting your principal is more important than a high return.

Will you be the only person working with me?

Are you on your own, or am I dealing with a firm that has my best interests in mind for the future?  Someone who is a one-person shop may not be able to provide you with the longevity you need to get you to the finish line.  Again, make sure they can help you meet your needs for as long as you need them.

How often do you contact your clients?

Some advisors call their clients once a quarter; some do it once a year.  Be sure you can get in touch with the person when you need them.  To make sure your goals are being met, proper communication is a key principle.

What is your track record?

How has your investment approach worked over the years from a performance basis?  If you are saving for retirement or having retirement assets managed, make sure to ask how they have done in the bad markets as well as the good.  Anyone can show periods where they have done well; ask them to show you the entire picture, not just a snapshot of a time when they did well.