5 Important Questions To Ask Your Financial Advisor

A financial advisor can have a drastic impact on your finances — both for good and bad. Smart and aligned advisors can help you stick to a long-term investing plan that meets your goals over time, while the worst advisors are more likely to put you in investments that line their own wallets, potentially costing you tens of thousands of dollars for advice that was supposedly free.

So when you’re hiring a financial advisor, you need to essentially conduct a job interview to make sure that a would-be advisor’s approach and incentives align with your own. Here are five key questions to ask financial advisors to see if they’re really the right fit for your needs.

Top questions you must ask your financial advisor

1. ‘Are you a fiduciary?’

Many people assume any financial advisor is a fiduciary. Unfortunately, many individuals can hang a sign that says they’re a financial advisor without having to give you good advice. In many cases, so-called advisors are really just salespeople in disguise. So, you need to determine whether they’re going to work in your best interest.

That’s why you need to ask them if they’re a fiduciary, because it helps align their interests with yours. According to the Certified Financial Planning Board, a fiduciary must “place the interests of the client above the interests of the … professional and the … professional’s firm” and “avoid conflicts of interest,” among other requirements.

Instead of the fiduciary standard, many financial advisors are held to a lower suitability standard, which requires a financial advisor to make sure the investment is suitable but not necessarily the best for you. This lower standard means that advisors can recommend investments that make more money for them even if they aren’t the best for you.

In the current system, it’s not always easy to figure out when an advisor is really a fiduciary or a salesperson. Ask your potential advisor whether he or she is a fiduciary and whether they’re obligated to work in your…

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