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Finding the right financial adviser
What are the right questions to ask?
July 30, 2004: 11:49 AM EDT
By Walter Updegrave, CNN/Money contributing columnist

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NEW YORK (CNN/Money) - I'm thinking of hiring a financial adviser. What are the right questions to ask and what things do I need to be aware of?

-- Zhanna, Woodcliff Lake, New Jersey

Before you start interviewing financial advisers, you first ought to ask a few questions of yourself.

Questions like: What exactly do I want this adviser to do? Do I want guidance on reaching goals like retirement or saving for my child's education? Or do I want help putting together an investment portfolio or even just picking a few mutual funds?

Am I looking for an ongoing relationship, perhaps even one where I turn over management of my investment portfolio to the adviser? Or am I really just looking for advice to help me deal with a specific event, such as rolling over my 401(k) money from a former employer's plan to an IRA?

Fine-tune your search

The answers you give to such questions can help tailor your search for an adviser. If you are looking for an overall evaluation of your finances, everything from retirement planning to building an investment portfolio to determining whether you have enough life insurance and you're set on the estate plan front, then you probably want to deal with a financial planner.

You should be aware that, depending on its complexity, a comprehensive financial plan can cost several thousand dollars or more. To find a planner in your area, you can check out the Financial Planning Association, the National Association of Personal Financial Advisors (for advisers who work for a fee as opposed to commissions) and the Garrett Planning Network (for advisers who charge by the hour).

If you're looking for narrower advice -- say, help putting together an investment portfolio or picking some funds -- either a broker or planner may be able to help (although you'd want to specify to the planner that you're not looking for an overall plan).

If you are looking for someone essentially to take charge of your investments -- actually pick stocks or mutual funds for you and then oversee your portfolio -- then you probably want the services of what's known in financial circles as a money manager, a pro who primarily runs investment portfolios. Many money managers require a minimum of six figures or more of investable assets, although you can find some managers willing to take as little as $25,000, sometimes less.

Some questions to ask

Whatever type of adviser you decide is right for you, you definitely want to talk to a few before you sign up with one, and you certainly want to get the names of a few current clients you can talk to about their experiences with the adviser.

Personal rapport also counts for a lot; you want to be sure the adviser is someone you'll feel comfortable working with -- and someone you can trust.

Clearly, no list of questions can ferret out all the information you need or cover every contingency. You'll have to use some common sense. But here are 10 questions that can get you started on your adviser quest.

  1. Are you registered with the Securities and Exchange Commission, your state securities regulator or NASD (the National Association of Securities Dealers) -- or some combination of those three?
  2. What professional credentials do you have -- CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), ChFC (Chartered Financial Consultant) or some other?
  3. How much experience have you had have working with individual investors?
  4. Exactly what type of service or recommendations will I receive from you? Will you help me put your recommendations in place?
  5. What will working with you cost me? And how will I pay -- a flat fee, a dollar-per-hour charge, commissions on the products you recommend? Will you disclose your fees in writing?
  6. Will you earn any money from our relationship other than the fees or commissions I pay?
  7. Have you had any run-ins with federal, state or brokerage industry regulators or ever had a client file an arbitration claim or other complaint against you?
  8. Will you give me the names of at least three clients you've worked with for at least three years?
  9. Can you give me some examples of the financial plans or recommendations you've given to clients similar to me?
  10. How will we evaluate whether the advice you've given me has been worthwhile? How often will that evaluation take place?

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One final note: Before you begin interviewing advisers, I think it's a good idea to spend some time perusing the section of the SEC's Web site that provides information and resources related to choosing a financial adviser.

And before signing up, it's usually a good idea to do your own little background check on the adviser. You can check out a broker by going to the National Association of Securities Dealers and a planner by going to the Securities and Exchange Commission or the North American Securities Administrators Association. Some advisers may fall under the jurisdiction of by all three of these organizations.


Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.