These days, financial advisors have a bad rap. In fairness, we deserve it. The advice industry has been confusing, opaque, and riddled with conflicts of interest. Still, to this day, many advisors receive sales commissions for selling financial or insurance products, while countries like Australia and the UK have long banned these types of compensation models. It’s no wonder 65% of Canadians don’t work with a financial planner.

But there are good financial advisors out there, and if they have their hearts in the right place and have the necessary expertise, they can provide incredible value. The trick is being able to separate the wheat from the chafe. Ideally, you’ll want to find someone who:

• Puts your interests first
• Doesn’t have any conflicts of interest (e.g. being paid a commission for selling you a financial product)
• Charges fees that are transparent
• Has the appropriate knowledge and expertise
• Takes time and interest to really understand you
• Explains their recommendations clearly and helps educate you
• Makes room in conversations for both partners rather than ignoring the quieter partner

The following questions will help you decipher whether the financial advisor you’re speaking to is that special person you can trust or another salesperson looking to make a buck. You may not have time to ask them all these questions, so focus on the questions that seem the most important to you.

General Questions

• What services do you provide? (e.g. investment management, financial planning, tax prep & filing, etc.)
• Can you tell me about yourself and your team and your/their qualifications, certifications, and licenses?
• How many clients do you serve?
• Would you liaise directly with my accountant, lawyer, or other trusted professionals in my life to help ensure everyone is on the same page and work through any potential conflicting messages I’m receiving between you and them?
• What is the greatest value your clients receive from you as an advisor?
  • Be wary of advisors who say they will generate superior returns for you. The vast majority of investment managers fail to outperform their benchmark indices once the fees that they charge are taken into consideration. A responsible financial advisor who provides holistic advice can and should discuss all the other ways they add value (tax planning, estate planning, cash flow & budgeting, insurance planning, helping keep you organized, educating you, acting as an accountability partner, being an objective 3rd party, etc.).
• What would happen if you/my advisor were unable/unwilling to continue providing advice? What contingency plans are in place?
• Do you have any clients I could speak with about their experience working with you?
• How are you compensated?
• Can you break down all the fees I might pay if I were to work with you? Please include any fees even if those fees don’t ultimately go to you (e.g. fees for underlying investments you recommend, taxes, etc.).
• Why did your last client leave you?

Financial Planning Questions

• Do you provide comprehensive financial planning?
• Will you help me understand my cash flow (e.g. categorize my spending) and help me create a budget?
• If so, can you describe your financial planning process and the types of questions you help clients answer regarding their finances (outside of their investments)?
• If you build financial plan projections, can we model out different scenarios? (e.g., what happens financially if we do/do not quit work to do independent consulting?)
• Do you conduct a Monte Carlo analysis to help assess the likelihood of us having enough to reach our financial goals? (and not outliving our money)
• Can you send me a sample of the financial planning deliverable a client receives from you?
• How often would we meet in the first year of working together, and how often would we meet on an ongoing basis? What types of things would we discuss?

Investment Questions

• Can you tell me about your investment philosophy?
• What is your investment strategy/process?
• Do you receive any compensation for selling investment products (e.g. mutual funds, ETFs, etc.)?
• What types of investments do you typically recommend to your clients? How important are investment fees to your decision to recommend an investment? N.B. Ideally the advisor should be cost-conscious and consider it a very important factor.
• What kind of returns can you generate? N.B. this is a trick question. Advisors cannot predict investment returns and should not be claiming they can produce better returns for you. Their job is to ensure your investments are appropriate for your risk tolerance and financial goals.

Questions to ask yourself after the interview

• Did I get a good feeling (whether you can articulate why or not) from them?
• Did the advisor listen to my concerns?
• Did the advisor listen to my partner?
• Did they communicate in clear language that I could understand?
• Did they take the time to ensure I understood what he/she was saying?
• Did the advisor inspire trust?
• Did the advisor inspire confidence?
• If I were to make a sub-optimal financial decision, would the advisor challenge me or let me proceed?