Ask These Four Questions Before Hiring a Financial Advisor

signing papers

You have taken an important step towards securing your financial future by making the decision to hire a financial advisor. That’s the good news. The challenging part is interviewing several financial advisors until you find the right one. This is especially true when you aren’t sure what to ask this professional. We recommend asking the questions below at a minimum. This should give you a good idea of which financial advisor to choose.

Do You Have Any Certifications? Where Did You Earn Them?

While certifications are usually voluntary, they tell a lot about the expertise of the financial advisors as well as any areas of specialization. In the financial services industry, Chartered Financial Consultant (ChFC) and Certified Financial Planner (CFP) are the two most common certifications. Others include:

  • Certified Management Accountant (CMA)
  • Certified Public Accountant (CPA)
  • Chartered Alternative Investment Analyst (CAIA)
  • Chartered Financial Analyst (CFA)
  • Chartered Investment Counselor (CIC)
  • Chartered Life Underwriter (CLU)
  • Chartered Mutual Fund Counselor (CMFC)
  • Financial Risk Manager (FRM)

All certifications require financial planners to meet the following criteria:

  • Pass a background check
  • Complete coursework required by the organization granting the certificate
  • Meet a specified experience level
  • Agree to abide by a strict ethical code of standards

Hopefully, a financial planner with one or more certifications makes you feel confident that you have made the right choice.

How Do You Receive Income?

Financial advisors can receive compensation in a variety of ways, including commission for selling you a specific product. Unfortunately, this can create a conflict of interest that may affect the advisor’s ability to remain partial. Many people choose fee-only advisors for this reason.

Typically, fee-only financial advisors charge clients an hourly rate, flat fee, or a percentage of the assets they currently manage for them. Knowing this upfront can help you avoid an uncomfortable situation later as well as plan your own budget and investments better.

Are You a Fiduciary?

The term fiduciary means that the financial advisor must act in your best interest. By law, those who aren’t fiduciaries only need to recommend suitable products. These may not be the best for your situation nor are they always the least expensive. The best way to find out is to simply ask the advisor you’re considering working with if he or she follows the fiduciary rule. That is because there’s nothing illegal about operating as a non-fiduciary. The United States Department of Labor attempted to set a fiduciary standard in 2016, but the higher courts overturned it.

Do You Specialize in Working with a Certain Type of Client?

Financial advisors can serve the general population or a subset such as high net worth individuals or small business owners. If you hope to work with someone with a good understanding of your background and challenges, you might consider a specialist. If you do choose a generalist, make sure you know each of the services that he or she provides. Some of the most common ones are retirement planning, tax planning, business succession planning, and estate planning.

Aura Wealth Management is Happy to Answer Any of Your Questions

We understand that hiring a financial advisor is a big decision and encourage you to interview as many as possible. That includes Aura Wealth Management. Please contact us to schedule a time to meet for your initial consultation.