Skip to content

Whether you need help planning for an upcoming liquidity event or are simply looking to grow your nest egg, you’ve likely reached a point where finding a quality financial advisor is paramount. But with so many financial advisors to choose from, it’s not always clear what separates one advisor from the next, let alone which is the right one for you.

To help you cut through the noise, we’ve outlined the six questions you should ask when embarking on your search for a financial advisor. Both quantitative and qualitative, these questions are designed to help you identify an advisor that is best suited for your circumstances, needs, and long-term goals.

Does this advisor work with people like me?

Everyone has their own reasons for needing a financial advisor. If you are a high-net-worth family, you may be looking to find ways to preserve and grow wealth for generations. If you are a business owner or entrepreneur, you may be interested in strategies for minimizing tax exposure related to selling their business.

No matter your reasons, it’s important to find an advisor with direct, relatable experience to your needs. For wealthy individuals and their families, this could include finding an advisor with expertise in:

  1. Complex trust and estate situations
  2. Charitable gifting strategies
  3. Public and private investments
  4. Liquidity event planning, including the sale of your business
  5. Equity compensation plan management
  6. Tax minimization strategies

While all of these events may not apply to you, be sure to highlight your specific needs when meeting with an advisor and ask what their experience is dealing with these types of situations.

What credentials does this advisor have?

In addition to their experience, an advisor’s expertise is also something you’ll want to confirm. More specifically, does the advisor have the appropriate professional certifications and credentials for your specific needs?

Some credentials you will want to watch out for, depending on your individual needs, may include

Are they a fiduciary? Or do they only meet a suitability standard?

The distinction between being a fiduciary and meeting a suitability standard is something that many people do not fully understand.

On the one hand, FINRA, the governing body for broker-dealers, says that broker-dealers must adhere to suitability standards for their clients. Suitability standards only mean that a broker-dealer’s recommended securities be suitable for client standards.

On the other hand, a fiduciary is legally bound to provide the highest standard of client care.

The SEC requires registered investment advisors to adhere to fiduciary standards. In layman’s terms, this means they must put client interests first. Fiduciary duty is the highest standard of care and is relevant to any industry in which client services are provided. It is a legal term that describes a relationship between two parties where one party is legally obligated to act solely in the other party’s best interest.

As a client, this legally protects you and binds the fiduciary, which in this case would be the financial advisor, to knowingly utilize their expertise and discretion to act in your best interest- even if it is contrary to their interests.

Fiduciaries cannot accept commissions for products and services that would not be in your best interest. Moreover, a fiduciary will not have any conflicts of interest nor suggest investments to you that would potentially provide them a kickback.

What is their compensation structure?

This is a very important distinction to understand, as an advisor’s compensation structure can have meaningful implications for you and the advice you receive.

In general, you’ll want to confirm that the advisor receives a flat fee for planning and/or investment management services only. This is referred to as the “fee-only” model, and it helps to ensure that the advice you receive is objective and in your best interests (as opposed to that of the advisor).

Conversely, some advisors receive outside compensation for selling products and commission fees. This type of fee arrangement can introduce a conflict of interest, as the advisor may be incentivized to recommend advice or investments simply because of their potential to earn additional fees.

Are they growing, and is it scalable?

A financial advisor’s growth is something fundamental to explore. The wealth management industry is a competitive space, so a strong track record of growth generally reflects positively an advisor’s of client satisfaction. It shows they’re generating business from referrals but also from retained clients.

That said, it’s important to put this growth into perspective. You want to be sure that an advisor isn’t growing at the expense of client service, so be sure to ask how many clients are assigned to each advisor. If you see a firm growing fast but understaffed, you may want to keep looking.

A firm that’s successful at attracting and retaining clients, but isn’t properly staffed, is likely to fall short of your expectations from a communication and client relationship standpoint.

Do you “click” with the advisor?

Much of the previous questions deal with quantitative factors you want to understand when considering a financial advisor. However, it’s equally important that you feel like you mesh with the advisor on a personal level.

Can you relate to them? Are they taking the time to get to know you? Are they aware of the type of client you are? Would you want to hang out with them over drinks?

When finding a financial advisor, do as much due diligence on the potential to build a long-term relationship as you do on their knowledge, credentials, and fiduciary responsibilities.

Wrapping it Up

Finding a quality financial advisor is not a one-size-fits-all type of deal. Clients have different needs and you want to find a financial advisor that best fits yours.

Be sure to do your due diligence and understand the quantitative and qualitative qualities they have to offer. While not an advisor may not check all of your boxes, answering the six questions we’ve outlined above will go a long ways towards finding the right advisor for your personal situation