When answering a prospective clients questions about my financial planning firm, I was reminded how difficult it is to interview a financial planner. Asking the right questions is important, but so is knowing what the answers mean. The terms “financial planner”, “financial advisor”, and “financial planning” are not protected by any type of regulation, so every professional has their own interpretation of what it means to be a financial services provider. Some financial advisors are not advisors at all, but merely salesmen using the term “advisor” to fool their customers into thinking they are clients. Others may only provide investment management, insurance products, or another singular focused service.
What questions should you ask when interviewing a financial planner?
NAPFA, the largest national organization of fee-only financial planners, has put together a wonderful guide with 26 questions to ask every financial advisor you interview. Feel free to send these questions to financial planners you are considering interviewing, so that you don’t waste your time interviewing service providers that don’t meet your needs.
Before selecting a financial advisor, you should have the answer to every single question in this guide. Most importantly however, read through the “Answer Key” on pages 9-11. This key will give you some context about each question, so that you know what the financial advisors answers really mean. Many financial service providers are great salesmen, and can make things sound much better (or different) than they really are. Stick to this guide, get all of the questions answered, and you will be armed with the knowledge you need to hire a financial planner.
In my opinion, the most important question in this guide is Question 9
Will you sign the Fiduciary Oath below?
The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest which will or reasonably may compromise the impartiality or independence of the advisor. The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business.
What the Fiduciary Oath means to you - the client
• I shall always act in good faith and with candor.
• I shall be proactive in my disclosure of any conflicts of interest that may impact you.
• I shall not accept any referral fees or compensation that is contingent upon the purchase or sale of a financial product.
Although many advisors will tell you they will act in your best interest, only a small percentage of them would be willing to print and sign the above oath on company letterhead.
You worked very hard to get to where you are today financially. Don’t just turn over your finances to an advisor before you have all the facts.
Have you ever asked your financial advisor these questions? Would your financial planner sign the Fiduciary Oath? Are there any additional questions you think should be added to the guide? Feel free to share your thoughts!
Alan Moore is a fee-only financial planner and founder of Serenity Financial Consulting in Shorewood WI. Connect on Google+. You can contact him at email@example.com, 414-455-5313, or visit his website at www.SerenityFC.com. Want more education? Download your free guide to the “10 Easy Steps To Securing Your Financial Future Today.”