Five Questions to Ask a Financial Adviser

04/17/2015 05:38 pm ET | Updated Jun 17, 2015

Everyone is searching for trusted financial advice. There's plenty of advice out there, much of it free - and some of it full of hidden incentives, costs and commissions. How can you choose?

The first step is to decide whether you need help primarily for investments or whether you need broader help in financial planning, including insurance, estate planning, and using the best tax strategies to manage your finances.

If you need the whole package, you want to search for a Certified Financial Planner - not just someone who calls himself or herself a "financial planner." You can do that search at Or, if you want to search for a CFP planner who only charges set fees, and does not get commissions on products, go to Another alternative is to go to the website of the Financial Planning Association, where you can search by geography or compensation style.

Then, make an appointment to talk with several before deciding. Here are five questions you should ask any adviser before making your choice.

1. Do you act as a fiduciary? That unusual word can make a huge difference in the advice you are receiving. (See recent column at Fiduciaries are obligated to put their clients' interests ahead of their own -and to fully reveal any compensation (either outright or in "soft dollars" such as trips, perks and other rewards) for the products they recommend! Brokers are not required to be fiduciaries. Ask the adviser to put it in writing that he or she adheres to fiduciary standards.

2. How are you compensated? Good advice is worth paying for - but you should know exactly how much you are paying. Some planners charge a flat fee. Others charge commissions. Some use a combination of the two. Ask also what kinds of investments they recommend - and whether the adviser's fees are in addition to the ongoing annual costs of the investment itself. Those fees really cut into your long-term returns.

3. How will you handle my account - and will I be dealing with you directly? It's important to set the ground rules of your relationship. Many advisers are too busy to meet with you more than once a year. You may be speaking to an assistant. Or you may be making contact online. If that troubles you, find an adviser with a more regular, more personal touch. Always insist that the planner consult you before making any investment changes or decisions.

4. Will you give me client references? It's not impolite to ask for references. But make sure the adviser does not blind you with "star" client names. You want someone who regularly deals with people in your situation. Then, be sure to call and check those references. Also, go to to check an adviser's disciplinary history.

5. What do you want to know about ME? After you've asked all your own questions, the adviser should turn the tables. You want an adviser who asks about your goals, your risk tolerance, your total financial picture. If an adviser seems unduly quick to start making investment recommendations, that's your clue to back away.

Many people spend more time picking out a pair of shoes than they do in choosing a financial adviser, perhaps because the concept of financial planning is so intimidating. Be courageous and organized in your search for financial advice. Take your time about the process and since the initial interview should be free of charge, it pays to check out several financial planners with different styles. Don't be afraid to say: "I'll think about it and let you know my decision."

And finally, trust the little voice inside you that tells you when something is not quite right. That means it probably isn't. And that's The Savage Truth.

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