10 Questions for Financial Advisors
Understanding an Advisor’s Background & Fees
Do you feel like all financial advisors are trying to give you the hard sell? It doesn’t have to be this way! The following three questions allow you to explore the background and experience of a prospective advisor and firm to see if they are a good fit to help you grow your wealth for decades to come.
What are your qualifications and experience?
The bar to calling oneself a “financial advisor” is low. Like with any professional, you want someone who has a proven track record of working with clients and understands how to help guide individuals and families to grow their wealth and reach their financial goals.
Financial advisors come from a wide variety of educational backgrounds, so focus your qualification questions on post-grad professional certifications such as the CERTIFIED FINANCIAL PLANNERTM designation.
2. Have you worked with clients in my specific situation of [insert details]?
Some advisors are generalists, working with any and all clients who come their way, while others specialize in helping a specific type of client via their niche. Which type of advisor works best for you will depend on your specific financial situation and needs.
Regardless of which you choose, your advisor should be experienced in helping people who are navigating similar financial issues and concerns as you. Give prospective advisors specific examples of issues or questions you encounter in your financial life and ask them to explain how they have helped clients through similar situations in the past.
3. Are you a fiduciary?
It is counter-intuitive, but not all financial advisors are legally required to put their clients interests ahead of their own. Brokers, for example, are only required to recommend products that they believe are “reasonably suitable” for clients.
I don’t know about you, but that isn’t enough for me. An advisor’s fiduciary duty means always acting with clients’ best interests in mind, avoiding conflicts of interest where possible, and disclosing material conflicts wherever they exist. Without an advisor held to the fiduciary standard, you are exposing yourself to the potential to be taken advantage of by unscrupulous actors.
How are Financial Advisors paid?
Financial advisors get paid in all kinds of ways. Hidden fees are often the norm, not the exception. Focus on working with an advisor who is clear about what you’ll pay and has financial incentives that support your long-term goals. These questions will help you understand how a potential advisor gets paid and if their fee structure aligns with what you’re looking for.
4. How are you compensated? Are you a fee-only advisor?
There is a lot of confusion about “fee-based” versus “fee-only” advisors. “Fee-based” is a marketing term that does NOT mean advisors are prohibited from earning commissions on products they sell.
Look for a fee-only advisor. Fee-only advisors should provide you with a clear, set rate for the services they provide and cannot receive commissions or other incentive payments on the products they sell or trade.
5. What is your fee structure?
Advisors should be open about their fee schedule and able to provide you with a clear expectation of how much you may pay on an annual basis. Be sure to ask if there are any other fees you can expect.
One note: many advisors refer to “basis points,” a piece of industry technical jargon. Basis points are parts of 1% - there are 100 basis points in 1%. So .85% is 85 basis points. Sometimes it feels easier to us than saying “point eight five percent” but that often isn’t clear to non-advisors.
6. What is the all-in fee I will pay (including fund fees) if I become a client?
You pay your advisor their stated fee, but the investment funds your advisor selects for you will also have fees embedded in them. If your advisor uses actively managed mutual funds, these fees can be up to 2% annually or even more! Ask what investment fund fees will sit on top of the fee your advisor charges.
Also ask prospective advisors if your performance numbers will be reported gross or net of fees. Reporting performance numbers gross of fees obfuscates your true financial performance - you always want to see performance reported net of all fees (both investment fund fees and your advisors management or financial planning fee, if applicable).
What will a financial advisor do for you?
Many financial advisors are salespeople focused on getting clients in the door, not on providing you with a lifetime of stellar financial guidance. Look for an advisor that focuses on building long-term relationships with their clients, not selling you products and then ghosting you. Ask these two questions to understand how a financial advisor likes to work with clients and what level of support you can expect from them.
7. How will our relationship work?
Among fee-only advisors, compensation varies depending on the level of service provided. Be honest with yourself about how much help you need from a financial advisor.
Are you a DIY-er who loves managing their own money and just needs occasional check-ins for advice and guidance?
Or do you want a true partner, who will know and understand your finances inside and out and is excited about helping you build a sustainable path forward together for years to come? An advisor who will do the legwork to answer your financial questions, giving you time and mental space back in your day?
8. What is your client meeting schedule? Do you meet outside that schedule?
Advisors vary widely on how often they meet with clients, how flexible that meeting schedule is, and what those meetings cover.
This question will help you understand how your advisor structures a year of client meetings and if that structure meshes well with how you would like to work with an advisor. Also ask how advisors handle one-off requests, if something urgent comes up in your financial life outside of their standard meeting schedule. A financial advisor exists to meet your needs, and you want to avoid getting into a situation where you desperately need advice and are unable to reach the professional who is supposed to be in your corner.
What is an advisor’s financial planning & investment philosophy?
Some financial planners go deeper than others during the financial planning process. A financial plan shouldn’t be a “one and done” deliverable or a casual review of your investments and risk tolerance.
Have you ever talked to a financial advisor and felt like all they were doing was throwing technical jargon about financial markets at you? It shouldn’t be that way! The advisor you want to work with is able to meet you where you are in conversations about investments and financial markets so you can understand how your money will actually be invested. Ask these two questions and follow up on anything you don’t understand to define how an advisor works with clients through both financial planning and investment management.
9. How do you approach financial planning?
Financial planning should be a comprehensive, evolutionary process that touches on every aspect of your wealth to create a living tool that is consistently revised and edited to provide you with the best possible guidance as your life circumstances change.
Ask prospective advisors if they can provide a sample financial plan to review, or if they can walk you through the deliverables they provide to clients during the financial planning process. Plan deliverables can vary from a one-page “action summary” updated annually to 100+ pages of technical charts, graphs, and analysis that is formally bound to gather dust on a shelf.
Ensure that how your advisor presents plans meshes well with how you learn and digest information. If you aren’t a big fan of highly technical details and get overwhelmed by huge volumes of information then a static financial plan may not be the best fit for your needs.
10. What is your investment philosophy?
The investment philosophy your advisor follows is an essential part of your relationship, as the building blocks for your future wealth generation. Look for someone who can effectively communicate about investments in a way you understand, is excited about educating clients on financial markets, and doesn’t focus solely on investments as the most important part of your overall financial picture.
If you are focused on living your values, ask prospective financial advisors what they do to ensure that your wealth is creating positive social impact while earning you market returns. Many advisors don’t focus in this area, but it is an essential point of consideration for values-focused individuals and families.
Choosing a new financial advisor can be a complicated and emotionally taxing endeavor. If you’d like to talk to an advisor who emphasizes financial planning and ESG investing, always puts their client’s needs first and focuses on conveying technical information in an accessible way, Contact Katherine or schedule a call to learn how she can help you build your wealth and create a plan for a sustainable financial future.
About Sunnybranch Wealth
Sunnybranch Wealth is a boutique, fiduciary, fee-only financial advisory firm that works with progressive individuals and families who want to build their wealth while creating positive social impact.
Sunnybranch specializes in working with millennials and busy families who need help but don’t have time or energy to devote to their finances. We serve as your trusted resource and partner, alleviating the stress of managing your wealth and letting you focus on living your life.
Our founder, Katherine Fox, is a CERTIFIED FINANCIAL PLANNER™, Chartered Advisor in Philanthropy®, and 21/64 Certified Advisor with deep expertise and experience in helping clients build wealth while navigating life’s financial challenges. Her work combines comprehensive financial planning, ESG and impact investing, and charitable guidance to serve clients who want to grow their wealth sustainably while giving back in a meaningful way.