10 Key Questions To Ask a Prospective Financial Advisor

Fact checked by Yarilet Perez
Reviewed by Khadija Khartit

With over 321,000 financial advisors in the U.S., you have plenty of choices in the professional you’re going to trust with your financial future. Thus, before engaging a financial advisor’s services, it’s essential to ask the right questions to know they’re truly qualified and can help you achieve your goals.

These goals will often be more than simply “financial,” and the difference between reaching them and falling short will often come down to the guidance you receive, Peter Lazaroff, an Investopedia top-10 financial advisor, told us.

“Advisors are offering more services for their fees, and the nature of the advice has changed significantly” in recent years, he said. “The best advisors these days resemble therapists more than number crunchers. Being a good advisor is about connecting with people, helping them solve their problems, and making life simpler. It’s not all about spreadsheets.”

Key Takeaways

• A financial advisor should focus on understanding your goals and values before recommending any investment strategies or products.
• Verify your advisor’s fiduciary duty and fee structure to ensure they’re legally obligated to put your interests first.
• Look for advisors with strong professional credentials (like CFP, CFA, and CPA) and experience working with clients like you.
• Your advisor’s investment philosophy and approach to managing investment risks should align with your personal goals and comfort level.
• Regular communication and transparency about costs, strategies, and performance benchmarks are essential for a successful advisory relationship.

Valerie R. Leonard, CEO of EverThrive Financial Group and another leading Investopedia financial advisor, said the most successful financial advisors generally are less concerned with gathering assets and selling products but, instead, focus on their client’s needs and goals. “By taking a client-first approach, they are better able to position their clients for success and create meaningful financial planning strategies that incorporate the most appropriate products for their client’s specific situations,” Leonard said.

The questions you ask a financial advisor as you look to begin a relationship need to help you determine whether you can trust them to understand and act upon your wants and needs. As the chart below shows, there are plenty of others around if you don’t like the answers you get from any one of them:

We’ve put together this list of 10 key questions to help you assess potential advisors’ expertise, investment philosophy, and whether they’re a good fit for your personality and background.

1. What Services Do You Offer?

It’s important to first understand what services a financial advisor offers and their specific areas of expertise before you begin working with them. Ask if they offer investment management, retirement planning, wealth management, tax advice, and estate planning if you’re seeking financial advice in these broad range of areas.

Quiz your financial advisor about whether they have expertise in that area if you need specialty financial advice, such as business planning.

“One red flag when working with an advisor that isn’t in the client’s best interest is them giving you advice in an area that they don’t have a lot of experience and expertise in,” said David Flores Wilson, a certified financial planner at Sincerus Advisory in New York City. “Business owners deserve to work with an advisor that can provide customized, specialized advice to business owners. Likewise, an executive at a public company with tax and financial planning needs and considerations around equity compensation needs an advisor that has experience in this area to be most effective.”

If you’re meeting with a financial advisor who clearly doesn’t generally work with clients like you, don’t be afraid to ask if they can refer you to someone who may be a better fit.

You’ll also want to know if your advisor offers financial education to help you navigate and make sense of more complex financial concepts if you’re just starting your financial journey. Continuous education helps you develop good financial habits to make more-informed financial decisions.

2. What Is Your Investing Philosophy?

Understanding a financial advisor’s investing philosophy is crucial since it reveals how they’ll approach managing your money and financial future. A well-defined investing philosophy should reflect both time-tested principles and adaptability to changing market conditions. Feel free to ask any potential advisor to explain their approach to the following:

• Asset allocation and diversification
• Active versus passive investment management
• Strategies for managing risk
• Market timing and rebalancing

You and your financial advisor should have compatible investing philosophies. You may prefer value stocks while your advisor has had tremendous success pursuing growth companies. You may be more interested in socially responsible investing while your advisor is more focused on profits and less on environmental impacts. How well you gel philosophically, though, goes beyond investment approaches.

Philosophical differences don’t necessarily suggest a poor advisor—as long as there is transparent communication about how investment decisions will be made.

3. How Much Do You Charge?

You shouldn’t go into a relationship with any financial professional without knowing their fees.

It’s not just what they charge but how they charge it: those who work on commission might have incentives that aren’t in your best interest. Thus it helps to know if your advisor is paid a fixed fee (whether a set amount yearly or a percentage of the funds you have invested with them).

In addition to a management fee, your advisor may receive a commission on products they sell to you. These products include insurance plans, annuities, or private security offerings. Ask your advisor if they’re associated with any commission-based products because they may offer you these items when they may not be in your best interest. The U.S. Securities and Exchange Commission has some strict rules regarding this practice.

Once you understand how much you’re paying your advisor, over time you’ll want to take a periodic step back and ask yourself: Are you getting your money’s worth? Keep an eye on how your portfolio grows (or doesn’t). Think about whether the advice, service, and results you’re getting justify the fees you’re paying. After all, this is your hard-earned money—you should feel confident that your advisor is earning their keep.

4. What Are Your Qualifications?

Learn what certifications your advisor holds. Many firms only require that their advisors take minimal courses. You want to avoid these. The financial industry is always changing, and you’ll want someone who’s most in tune with the latest happenings in the sector. These three advisor designations are looked after by certification bodies that should ensure designation holders are keeping up with the latest changes in the field:

• Certified Financial Planner (CFP)
• Chartered Financial Analyst (CFA)
• Certified Public Accountant (CPA)

You’ll also want your advisor to have a clean record. Always check the background of both the firm and individual advisor for any past disciplinary problems. You can do this through FINRA’s free BrokerCheck tool, which provides access to the Central Registration Depository, an extensive database of employment and disciplinary history. For registered investment advisors, check the U.S. Securities and Exchange Commission’s Investment Advisor Public Disclosure site.

You also should ask about the advisor’s specialty and how many clients they take on each year. This will give you a feel for the market segment the advisor focuses on, if any, and the breadth of investing advice they offer.

Some investors may want someone focused on a market niche while others appreciate a broader range of advice.

Note

There were 321,000 personal financial advisors in the U.S., according to the most recent data from the U.S. Bureau of Labor Statistics.

5. Do You Have a Fiduciary Duty to Me?

Ask your financial advisor if they have a fiduciary duty to you and request the declaration in writing. This means that your advisor is legally and ethically bound to put your best interests ahead of theirs. Financial advisors can be held to different standards of care depending on their licensing and credentials. It’s thus important to clearly understand what their obligations are to you.

Not all financial advisors are fiduciaries, while some may serve as fiduciaries in one area but not others.

A key benefit of working with a registered investment adviser or CFP is that they must provide a fiduciary duty to their clients. They must disclose any conflicts of interest and work to eliminate them under this standard, helping to give you peace of mind that your interests are being put first.

6. What Investment Benchmarks Do You Use?

Investors ranging from someone brand new portfolio allocation to the biggest institutions in the U.S. determine how their investments are doing by using benchmarks. These serve as standards against which investment performance can be measured, so choosing the right benchmark is important.

Your advisor should be able to clearly explain the following:

• The specific benchmarks they use for different portions of your portfolio
• Why these benchmarks are best for your investment strategy
• How frequently they measure performance against these benchmarks
• What constitutes an acceptable performance for them

For stock investments, standard benchmarks include broad market indexes like the S&P 500 for U.S. large-cap stocks. Fixed-income portfolios might be measured against the Bloomberg Aggregate Bond Index. There are other, more specific indexes for stocks, bonds, and other holdings, including real estate.

Whatever benchmark is used, it’s important to understand that beating it isn’t always the primary goal. Your advisor should explain how they use benchmarks in the context of your financial objectives. For instance, if your goal is to generate stable retirement income, your success might be better measured by your portfolio’s ability to meet your income needs rather than outperforming a particular index.

7. How Do You Integrate Newer Technologies Into Your Advisory Services?

The modern financial advisory landscape increasingly blends human expertise with digital capabilities. “Clients continue to want and expect more,” said Brian Schmehil, managing director of wealth management for the Mather Group. “Advisors will need to leverage AI and other technologies to provide high-quality advice to a lot more clients.”

Understanding how your advisor uses technology is a crucial part of getting the services you want. This is especially important in an age where you can track and change your portfolio with a smartphone.

Many advisors offer a mix of digital tools, including the following:

• A secure client portal for account monitoring and document sharing
• Digital financial planning tools
• Software for comparing different investment scenarios
• Virtual meeting options (video conferencing, screen sharing)
• Mobile app access for portfolio monitoring and basic transactions
• Automated portfolio rebalancing capabilities
• Integrated tax preparation and other financial tools

While robo-advisors offer lower-cost automated investment management, many traditional advisors now provide “hybrid” services that combine algorithmic portfolio management with human oversight and personal consultation. This approach can offer the best of both worlds: cost-efficient, automated investing for routine portfolio management and human expertise for complex financial planning, tax strategy, and life transitions.

Younger investors, Schmehil said, will want more technology involved over their lifetime “but also have heavy human interaction when required.” That’s because “the robo-advisors fare well when investors are comfortable sitting on auto-pilot, making money. But the market doesn’t always cooperate, and their service model doesn’t work in times of distress.”

No matter how much or little a financial advisor uses the latest technology, you’ll want to ask these follow-ups:

• How do you protect sensitive financial information?
• What digital tools do you provide for monitoring investments?
• How do you use technology to enhance rather than replace personal service?
• What is your backup system for storing your financial records?
• How frequently do you update your technology platforms?

The key consideration, as always, is what best suits your needs. For younger clients who prefer digital interaction, mobile access and digital planning tools might be essential. For clients with complex financial situations, sophisticated tax-planning software and estate-planning tools might be more important than basic portfolio management features.

Watch for red flags such as outdated systems, lack of two-factor authentication, or resistance to providing digital access to account information.

8. How Do You Manage Liquid and Illiquid Investments?

Understanding how your advisor approaches different types of investments based on their liquidity (ease of buying and selling at a reasonable price) is crucial for building a portfolio that matches your needs. Your investment strategy should balance immediate accessibility while still having the potential for long-term growth.

The balance between liquid and illiquid investments in your portfolio should be based on the following:

• Age and time horizon
• Current income needs
• Risk tolerance
• Tax needs
• Estate planning goals

Liquid Investments

These are readily accessible funds that serve several important purposes in a financial plan:

• Emergency reserves (typically three to six months of expenses)
• Short-term financial goals (one to three years)
• Strategic cash positions for investment prospects
• Regular income needs and planned expenses

Your advisor should have a clear strategy for managing liquid assets that balances safety, accessibility, and reasonable returns. This might include the following:

• High-yield savings accounts or money market funds
• Short-term government securities
• Highly traded exchange-traded or mutual funds
• Short-duration bond funds
• Cash management strategies

Illiquid Investments

Long-term holdings typically offer higher potential returns in exchange for being less able to cash out quickly:

• Retirement accounts (401(k)s, individual retirement accounts)
• Real estate investments
• Private equity
• Structured products
• Long-term bonds

Any potential or current advisor should be able to explain the following:

• The rationale for any illiquid investments in your portfolio
• Expected holding periods and exit strategies
• How illiquid investments complement your liquid holdings
• Risk management strategies for less liquid assets

9. Which Custodian Do You Use?

An advisor’s choice of custodian is critical to protecting your assets and ensuring efficient portfolio management. A custodian is a financial institution that holds and safeguards your investment assets, providing an essential layer of security and oversight.

Ask what percentage of your investment the custodian’s fees represent. These fees can eat into investment returns if they charge for everything from account opening to inactivity. You’ll want to be able to assess the following:

• The reputation and financial strength of the custodian
• Regulatory oversight and level of insurance protection
• Length of the advisor’s relationship with the custodian
• Integration with advisory services and technology platforms

Inquire about what procedures it has in place to prevent fraud, theft, and other unauthorized activity. It’s also crucial to ask about the custodian’s technology, ensuring that its platform provides intuitive, secure access that makes it straightforward to securely view your account information. Respected custodians include Charles Schwab, Vanguard, and Acorns.

Since most advisors use well-known, reputable services, this should be a quick topic to cover. That said, there are red flags to watch out for:

• Advisor acts as their own custodian
• Lack of third-party oversight
• Limited insurance coverage
• Poor technology integration with their other platforms
• Unclear fees

Knowing that your financial advisor uses a trusted custodian can give you confidence that your investments are safe. There’s enough risk in investing without this being a concern.

10. How Often Should I Review and Update My Financial Plan?

It’s important to regularly review and update your financial plan as your financial goals and market conditions evolve. What may have been suitable a year ago may not align with your current situation or a shifting market.

You’ll need to meet with your financial advisor at least once a year to update them about your needs and make any changes. You can schedule virtual meetings to stay in regular contact if you can’t meet in person.

You may even review and update your financial plan semiannually if there’s a significant change in your investment goals, income, tax laws, or interest rates. Your budget or savings plan may also need adjusting to better reflect your updated financial position if you’ve recently changed jobs.

A change in tax laws could save you thousands of dollars by tweaking your investment portfolio. It’s also a good idea to assess and update your financial plan if there’s a substantial change in interest rates, especially if you have debt or you’re saving for retirement. 

Given all this, when meeting with a potential advisor, you’ll want to ensure they can take care of this for you through the following:

• A structured review calendar
• Clear means of communication whenever needed
• Regular market updates
• A means to be proactive with new recommendations
• Documentation for all reviews and changes

As Alyson Claire Basso, managing principal of Hayden Wealth Management in Middleton, Massachusetts, told us, “It’s not just about whether they’re making money or not, but how well you’re keeping them in the loop. Research suggests that clients often leave financial advisors not because of losses, but because of lack of communication. It is crucial to stay in touch, be transparent, and manage expectations, especially when things get rocky.”

Can I Trust My Financial Advisor?

Financial advisors consistently tell us that trust is the most crucial part of their relationships. Clients “need to know that I genuinely care about them, that they can rely on me to do what I say I’m going to do, and that I’m willing to be open and honest about who I am,” Leonard said. “If you add the extra complexity that money is an extremely emotional and personal topic, you’ll understand why establishing and maintaining trust with clients matters above all else.”

You’ll be able to determine whether you feel comfortable with them overseeing your finances if you ask your financial advisor questions and better understand their background. Ask about their qualifications, experiences, fee structure, and philosophy to gauge whether you’d still like to hire them and use their services.

What Do Different Financial Advisor Certifications Mean?

Each indicates specific expertise and levels of education. The CFP designation is one of the most comprehensive credentials, requiring extensive coursework, a rigorous exam, and three years of experience. CFP professionals must maintain a fiduciary duty to clients and demonstrate expertise across investment, tax, estate, and retirement planning.

The CFA designation focuses more specifically on investment analysis and portfolio management. Considered a quite challenging credential to obtain, it requires passing three intensive exams and demonstrates deep knowledge of markets and securities.

For those seeking comprehensive financial planning services, the chartered financial consultant (ChFC) designation offers expertise similar to the CFP, with additional specialized knowledge. This credential requires completing nine college-level courses and emphasizes the practical use of financial planning principles.

Finally, CPAs who specialize in financial planning may earn the personal financial specialist (PFS) designation, combining tax expertise with comprehensive financial planning knowledge.

What Fees Does a Financial Advisor Charge?

Your financial advisor may charge fixed management fees, fixed retainer fees, hourly consulting fees, or fees based on the total assets under management. They may also receive commissions, although you don’t pay for them directly.

The Bottom Line

Selecting the right financial advisor is a crucial decision that impacts your long-term financial success. The process requires carefully evaluating their qualifications, approach, and fit with your finances, goals, and risk tolerance.

Ask questions in your initial meeting about the types of services they provide, their investment philosophy, how much they charge, whether they have a fiduciary duty, what investment benchmarks they use, whether they offer robo-advisor services or access to new technologies, what custodian they use, what the best options are for your liquid and illiquid funds, and how often you need to review and update your financial plan.

The best advisory relationships are built on trust and good communication over changes in your portfolio and your financial goals. Take the time to thoroughly check out potential advisors using these questions and criteria. Don’t hesitate to interview several advisors before making your decision, and be prepared to reassess the relationship periodically once you’re in one to ensure it continues to serve your needs.