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How to Choose a Financial Advisor: 10 Key Questions to Ask

10 questions to ask your financial advisor

If you’ve never worked with a financial advisor before, getting started can feel intimidating. Knowing how to choose a financial advisor starts with knowing what questions to ask. To help you have a more seamless experience, we put together a list of questions to ask a financial advisor in order to feel more confident about making a good match.

Question #1: What financial planning experience do you have?

This is among the most important questions to ask a financial advisor because it reveals key information about their qualifications. First of all, find out how long the financial planner has been in practice. Ask about their career background, including past work experiences and specialties. Ask the planner to briefly describe how their past experience relates to their current practice. It’s important to choose a financial planner who has experience counseling individuals on their financial needs.

Question #2: What are your qualifications?

The term “financial planner” is used by many financial professionals. Ask the planner what qualifies them to offer financial planning advice and whether they are recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFP® practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). These titles often represent years of training and continuing education, and individuals need to pass rigorous examinations in order to earn these qualifications.

Look for a planner who has experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Ask the planner how they stay current with changes and developments in the financial planning field. Check references, if possible. If a planner holds a financial planning designation or certification, the CFP Board or other relevant professional organizations will have records of this.

Our team of Des Moines financial planners have industry training, along with credentials and certifications, to show our clients that we’re qualified to give financial advice.

Question #3: What financial services do you offer?

A financial planner offers different services depending on a number of factors, including credentials, licenses and areas of experience. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper registrations or give investment advice unless registered with state or Federal authorities.

Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters. Our advisors at Compass Financial provide advice on a variety of financial topics, and they are licensed and registered to sell insurance and securities products.

Question #4: What is your approach to financial planning?

Ask the financial planner about the type of clients and financial situations they typically like to work with. Some planners prefer to develop one plan by bringing together all of your financial goals. Others provide advice on specific areas as needed. Make sure the planner’s viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.

At Compass Financial, we have no minimum net worth requirements. We believe in helping you plan your financial future regardless of your income level or financial goals. It’s not important to us whether you have a dollar to your name or millions in assets. Our Des Moines financial planners’ goal is to create a safe place to share questions and concerns, and we offer patient listening and thoughtful guidance.

Question #5: Will you be the only person working with me?

The financial planner may work with you directly or have others in the office assist in providing you with advice. You may want to meet everyone who will be working with you. If the planner works with professionals outside his own practice (such as attorneys, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.

Question #6: How will I pay for your financial services?

As part of your agreement, the financial professional should clearly tell you in writing how they will be paid for the services to be provided. Financial professionals can be paid in several ways

  • A salary paid by the company for which the financial professional works. The financial professional's employer receives payment from you or others, either in fees or commissions, in order to pay the financial professional's salary.
  • Appointment fees based on an hourly rate, a flat rate or a percentage of your assets and/or income.
  • Commissions paid by the client for investments sold to you to carry out the financial planning recommendations. 
  • A combination of fees and commissions. In this situation, advisors charge fees for the amount of work done to develop financial planning recommendations, and they also receive commissions from any products sold. In addition, some planners may offset some portion of the fees you pay if they receive commissions for carrying out their recommendations.
  • A combination of flat hourly fees and percentage fees. For example, Compass Financial charges a flat hourly rate for financial planning services. These clients pay the same hourly rate no matter their income level. Our advisory investment accounts charge a percentage fee of the assets under management (AUM).

Question #7: How much do you typically charge?

While the amount you pay the financial professional will depend on your particular needs, the financial professional should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs should include the following:

  • The planner’s hourly rates or flat fees
  • The commission on products you may purchase as part of the financial planning recommendations

Question #8: Does anyone other than me benefit from your financial recommendations?

Sometimes, a planner might have business relationships or partnerships that could affect their professional judgment while working with you. Ask the planner to provide you with a description of their conflicts of interest in writing.

For example, financial planners who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you, such as business they receive for referring you to an insurance agent, accountant or attorney. In short, a planner should disclose any relationship that could inhibit them from acting in your best interest. At Compass Financial, our Des Moines financial planners strive toward transparency, and your financial goals are our top priority.

Question #9: Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?

This may not be the first thing on your mind when meeting a new potential financial planning partner, but it’s one of the most important questions to ask a financial advisor. Several government and professional regulatory organizations, such as FINRA (formerly NASD), state insurance and securities departments and CFP Board keep records on the disciplinary history of financial planners and advisors. Ask about relevant regulatory organizations and contact these groups to conduct a background check.

All financial planners who are associated with a company that is registered as an investment advisor, must be able to provide you with a disclosure form called Form ADV Part 2. 

Question #10: Can I have it in writing?

Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.

Types of Financial Planners & Advisors

Not all financial planners and advisors are the same, and there are many different types of financial planners. Some specialize in one particular area, like retirement planning, and some have experience in a broad variety of areas. When it comes to the distinction between financial planners and financial advisors, there is a lot of overlap. Both financial planners and financial advisors can help you with strategies for pursuing your financial goals, but they may favor different techniques or hold different certifications.

The fee structure for financial planners and advisors can vary. Some financial planning companies, like Compass Financial, use an hourly rate. This hourly rate doesn’t change depending on income or wealth. Other advisors may charge an hourly rate or a percentage of annual income or a percentage of the total wealth being managed. When we manage advisory investment accounts for our clients, they pay a percentage fee according to the assets under management.

A great way to figure out how to choose a financial advisor is to explore different types of financial planners and advisors. Do your research and look around online. Ask for referrals from friends, family members or colleagues. At Compass Financial Services, we offer free consultation appointments where you can use these questions to find out if it would be a fruitful partnership.

Learn More About the Financial Planners at Compass Financial in West Des Moines

If you decide you’re ready to reach out to a financial planner in Des Moines, contact Compass Financial. Any of our Certified Financial Planners or LPL Registered Representatives would be more than happy to answer any questions you have about their experience and qualifications.