Evaluating Financial Advisors: Questions to Ask Before You Hire One

Choosing a financial advisor is a high-stakes decision. A good advisor helps you clarify goals, reduce costly mistakes, and keep a plan on track; a poor match can cost time, stress, and money. Below is a structured, practical guide you can use during interviews and follow-up due diligence — written to help you verify credentials, uncover conflicts, and judge whether an adviser will act in your best interest.

Note: This article is educational. It is not personalized investment advice. For tailored recommendations, consult a qualified advisor or legal professional.

Why structured questions matter

In my practice working with clients over 15 years, the clients who had prepared concise, prioritized questions for advisor interviews made far better hiring decisions. Prepared questions expose gaps quickly: inconsistent answers about fees, vague claims about performance, or an inability to name custodians or compliance documents are all red flags.

Regulatory context: registered investment advisers (RIAs) file Form ADV with the SEC or state regulators and owe a fiduciary duty to clients; brokers are generally subject to a suitability standard and are searchable via FINRA BrokerCheck. Always request and review Form ADV and BrokerCheck records before hiring (SEC, FINRA).

Sources and verification tools:

Core questions to ask (and why each matters)

  1. What are your qualifications and licenses?
  • Why: Certifications (CFP, CFA, CPA/PFS, ChFC) indicate training and a code of ethics. Licensing (state insurance, Series 7/66 for brokers) determines permitted services and regulatory oversight. Verify via CFP Board, FINRA, and state regulators.
  1. Are you a fiduciary when working with me?
  • Why: Fiduciaries must put client interests first; not every advisor is a fiduciary for every engagement. Ask for this in writing and request Form ADV Part 2 which describes fiduciary status and conflicts (SEC).
  1. How are you compensated? Show the math for my situation.
  • Why: Compensation shapes incentives. Common models: fee-only (flat, hourly, or AUM), fee-based (fees plus possible commissions), commission-only, and commission + fee hybrid. Ask for a sample invoice or AUM fee calculation. Typical AUM fees often range from roughly 0.25%–1.00% depending on services; ask how blending or tiering affects you.
  1. What services are included and excluded?
  • Why: Some advisors provide comprehensive financial planning (tax, estate, cashflow), others only investment management. Confirm whether tax or estate work is coordinated or outsourced and whether financial planning is ongoing or a one-time plan.
  1. Who will I actually work with day-to-day?
  • Why: Small firms may have teams. Identify the lead advisor, support staff, and who manages trades, reports, and client service.
  1. Can you provide Form ADV, privacy policy, and sample client agreement?
  • Why: These documents disclose conflicts of interest, custody arrangements, fees, and termination clauses. Read them before signing.
  1. Do you use a custodian? Who holds client assets?
  • Why: Assets should be held by an independent custodian (e.g., Fidelity, Schwab). Direct custody reduces reconciliation risk and conflict.
  1. How do you measure and report performance?
  • Why: Ask about benchmarks, reporting frequency, and whether returns are net of fees. Prefer advisors who report consistently and transparently.
  1. What is your investment philosophy and typical asset allocation for someone like me?
  • Why: Philosophy signals risk management, tax-awareness, and alignment with your time horizon.
  1. How will you communicate with me? How often?
  • Why: Agree on meeting cadence, notification triggers, and preferred channels (secure portal, phone, video).
  1. How do you handle conflicts of interest?
  • Why: Look for explicit disclosures and policies that minimize conflicts. If they accept commissions or proprietary products, ask why those choices would benefit you.
  1. Can you provide references and sample client scenarios with comparable needs?
  • Why: References help verify real-world service delivery. Ask for anonymized examples of plans for clients with similar goals.
  1. What are the terms to end the relationship?
  • Why: Understand notice periods, pro-rated fee refunds, and whether there are transfer or termination fees.
  1. How do you protect client data and accounts?
  • Why: Ask about encryption, two-factor authentication, vendor policies, and breach notification protocols. Cybersecurity is an essential part of fiduciary care today.

Verifying credentials and background checks

  • Check CFP or other credential status at the CFP Board (https://www.cfp.net).
  • Use FINRA BrokerCheck for broker-dealer records and complaint history (https://brokercheck.finra.org).
  • Use the SEC’s Investment Adviser Public Disclosure (IAPD) to review Form ADV Part 1 and 2 for RIAs (https://adviserinfo.sec.gov).
  • Check State securities regulator for disciplinary actions (North American Securities Administrators Association links).

If you find undisclosed disciplinary history, disputes, or omitted material facts, treat this as a serious red flag. See our related guide on spotting fake advisors and verification steps for practical red-flag indicators and verification steps: Spotting Fake Financial Advisors: Red Flags and Verification Steps.

Red flags to watch for

  • Vague or evasive answers about fees or conflicts.
  • Guarantees of market-outperforming returns.
  • Pressure to sign quickly or transfer custody to an account the advisor controls.
  • Refusal to produce Form ADV, a written contract, or references.
  • High turnover among client-facing staff or poor documentation of trade authorization.

Sample interview checklist (printable)

  • IDs to verify: Name, firm, registration numbers, and website.
  • Documents to collect: Form ADV Part 2, client agreement, privacy policy, sample financial plan, and representative client performance reports.
  • Questions to ask: See the core questions above — prioritize the 3 items most important to you (fees, fiduciary duty, and communication).
  • Follow-up tasks: Run BrokerCheck and Form ADV review, request 2 references, and confirm custodian and account types.

Contract and engagement items to negotiate or confirm

  • Scope of services: financial planning, investment management, tax coordination.
  • Fee schedule and how/when fees are billed and calculated.
  • Termination clause and asset transfer process.
  • Custodian name and third-party relationships (e.g., wrap accounts, insurance carriers).
  • Record access, reporting cadence, and how performance is calculated.

Examples from practice

In my practice, I once helped a client vet two advisors: one marketed as a comprehensive planner but charged commissions for insurance and annuity products; the other was fee-only and used an independent custodian. After reviewing Form ADV and asking for net-of-fee performance data, the client chose the fee-only advisor because the compensation structure and custodian arrangement reduced conflicts and improved transparency.

Another client accepted an advisor without verifying BrokerCheck records, only to find multiple customer disputes later. That experience reinforced our standard: always check public records before transferring funds.

Related reading

Frequently asked questions

Q: How many advisors should I interview?
A: Interview 2–4 advisors to compare fees, philosophy, and chemistry. Too few interviews increase the risk of missing a better fit; too many can produce analysis paralysis.

Q: Is a lower fee always better?
A: Not necessarily. Lower fees can reduce costs but also reflect reduced service. Compare net return, scope of services, and whether planning is included.

Q: Should I sign a long-term agreement?
A: Only after you’ve reviewed termination terms, fee refunds, and transfer details. Prefer agreements that allow an exit without excessive penalty.

Final checklist before you hire

  • Confirm fiduciary status in writing and review Form ADV.
  • Verify credentials and disciplinary history (CFP Board, FINRA BrokerCheck, SEC IAPD).
  • Understand and document fees and how they’re calculated.
  • Confirm custodian and asset custody arrangements.
  • Request and check client references.
  • Ensure secure communication methods and data protections are in place.

Professional disclaimer

This information is educational and general in nature. It does not replace individualized professional advice. Verify regulatory records and consult licensed professionals for personalized recommendations.

Authoritative sources

(Links above direct to authoritative registries and consumer guidance; check those sites for updates.)