When shopping for a financial planner, you can usually book a free introductory meeting. You’ll want to ask questions, establish rapport and seek a good fit.
The nature and scope of your questions drive the vetting process. Most consumers know to ask about the adviser’s background, qualifications and service offerings.
Other important questions revolve around how the adviser gets paid and if the adviser is a fiduciary who is obligated to put the client’s interests first. If the adviser will handle investments, it also makes sense to ask about any proprietary investment strategies or overarching philosophy that governs portfolio management.
The most scrupulous shoppers dig deeper. They fire off another round of inquiries that generates more revealing answers.
Ideally, you want to pose questions that advisers rarely hear. You’re more apt to get unguarded responses that enable you to make a more informed decision.
Try these smart questions:
1. When it comes to investing, what keeps you up at night? This shows how an adviser views investing, from assessing risk to spotting trends to riding market swings. Honest advisers will admit what worries them and how they safeguard client assets from worst-case events. They may also reflect on their years of experience in the business — and how past crises have shaped their investment outlook.
2. What are your goals for your practice? The answer helps you track an adviser’s career trajectory. You can find out if they prioritize, say, growth or revenue goals, moving to a bigger office or exit-planning. Perhaps the adviser simply wants to run a boutique practice with a limited number of clients — or amass enough clients to hire associate planners and eventually open multiple offices.
3. What do you think of long-term-care insurance? Assuming the adviser does not sell insurance, this question evaluates their holistic understanding of the role of insurance. (You can ask about any type of insurance, such as the difference between term- and cash-value life insurance or whether recent insurtech innovations are worth exploring.) If you’re not curious about insurance, ask about HELOCs (home equity lines of credit) or different types of mortgage loans.
“One way to drive trust is to ask about a product that the adviser doesn’t sell and evaluate the quality of the answer,” said Laura Varas, founder and chief executive of Hearts & Wallets, an independent data and benchmarking firm in Rye, N.Y.
4. There’s a term I hear bandied around. Can you explain it to me? Pick an acronym or financial instrument that mystifies you. Then ask the adviser to define it.
“You want an adviser who explains things in understandable terms,” Varas said.
5. How often will you communicate with me? Advisers love to talk about touchpoints — the number of times they contact you during the year. They might rave about their informative weekly market update newsletter or video blogs (also called vlog posts).
But there’s a difference between relying on automated content and initiating phone calls, personal emails or in-person sessions. Find out how many times you can expect to schedule a client review meeting (quarterly? semiannually?) and the best way to reach the adviser with ongoing questions or concerns.
6. Tell me how to evaluate you: This helps you assess how advisers see their role. Do they want you to measure their success by their market-beating investment performance? Do they want to provide you with responsive, hassle-free service? Do they view themselves as your partner in guiding you to establish and stick to a long-term financial plan?
While the above questions are a good starting point, some consumer advocates will urge you to ask about an adviser’s values. After all, you want to know if your values mesh with theirs.
There’s nothing wrong with asking about an adviser’s mission, values and what attracted them to their line of work. But treat their answers with some wariness.
“Just because you ask a question doesn’t mean you will get a truthful answer, especially if the topic is sensitive or the answer may be unflattering,” said Einav Hart, Ph.D., an assistant professor of management at George Mason University School of Business.
Advisers can boast about their commitment to excellence, meticulous attention to detail or work ethic. They can cite examples of their integrity (“I just turned away a client who asked me to hide assets from his spouse!”). This may all be true — or not.
Hart urges investors to consider that the way they ask a question can signal their assumptions, preferences or knowledge. Such signals can in turn affect the adviser’s response. If you ask an adviser’s opinion about real estate syndication platforms, for example, use neutral wording. Don’t indicate your enthusiasm (or lack thereof) for these investments.
“They may answer the way you want to hear,” she said. “To get the truth, it is better to ask broad, open-ended questions that don’t signal any particular preference.”
More: ‘It’s my money. I can do anything I want.’ That attitude is a good way to go broke.
Also read: How to know if you’re living with a ‘money avoider’
This post was originally published on Market Watch
