Money Essentials

Questions to ask a financial planner

Grill your prospective planner to make sure they're the right match for you.


It doesn't matter if you're in the market for a new car or a pound of tomatoes. If you're smart, you inspect the merchandise before you buy it. The same goes for hiring people.

Ideally, you've got the names of planners who've been referred to you by a personal contact or from professional groups. Now's the time to make the final call, and the best way to do that is during a face-to-face interview. Many advisers give initial meetings without charging a fee, so this shouldn't cost you anything but time. Now, to make sure that's not wasted, here's what to ask:

1. What do you charge and what method do you use to get paid?

Planners use different methods to bill clients. You can choose between fee-only, fee-based, and commissioned planners. Either way, you should know exactly what you're getting yourself into. Fee-only planners, for example, may charge flat rates or an annual retainer. Sometimes they bill by the hour or charge a percentage - usually 1 to 2% - of a client's assets. For more about how planners charge clients see What should it cost?

2. What are your credentials?

A planner can point to a college or grad-school diploma. But does he really know about retirement and tax planning? Can he help you determine how much insurance you need while suggesting the best way to fund your teenager's college education?

That's where credentials come in. Many special designations are awarded to men and women who have trained for and passed exams on major points of financial planning. Find out what a planner had to do to earn her credentials and who awarded them.

3. How much experience do you have?

The key here is relevant experience. A planner may have decades worth of experience catering to the rich - helping set up tax-saving trusts for spoiled grandchildren, for example. But if you have simpler needs, like planning for retirement and saving for a first home, you want someone who has plenty of experience in those areas. A good way to find out if someone has relevant experience is by asking a planner to describe his or her typical client.

4. What planning services do you provide and how often do you see your clients?

There's a big difference between tax planning and tax preparation. Ditto for insurance planning and retirement planning. Needless to say, you should know what services you'll get from any one planner - then make sure they mesh with the kind of help you want.

"So often people call themselves a financial planner but all they do is manage your money," says Dee Lee, a CFP from Harvard, Mass., and author of "Let's Talk Money." "So what you want to know is, are they going to look at your financial life in detail? Will they review your insurance needs and your retirement needs?"

5. Does your planning include specific recommendations for investments or other products?

It doesn't matter if your planner makes money by commissions or is fee-only. Find out ahead of time if you'll get specific hand-holding or more general directions. Depending on how self-directed you are, you may want someone who's going to tell you exactly what kind of insurance to get, how much to purchase, and where to buy it. On the other hand, you may feel more confident with say, your ability to pick mutual funds, and not want any input in that department.

6. What are you selling and who's paying your commissions?

It's not just enough to know whether or not a planner earns commissions. You should know specifically how much he makes from various products he sells and/or recommends. For example, is this person going to get more from selling annuities than bonds? If you have a clear understanding of how a planner earns his living, you can determine if you're getting advice that's in your best interest.

7. Can I get references from other clients?

If possible, get two or more references, ideally from longtime clients. When following up with references, focus on specifics: How helpful was the planner when someone had to handle a financial crisis, such as a death in the family or a big investment loss? Is it easy to get appointments?

8. Do you have any questions for me?

It's fairly obvious that there's a correlation between how well an adviser understands your needs and the quality of the advice you get. That said, it's important that your planner asks the kinds of questions to help you meet your goals, even the ones you haven't thought to identify.

"They should be asking questions like 'Tell me about your parents?'" says Lee. "You may have a child who's going to college in 10 years, but what if your mother is 70 years old? Will you be financially responsible for her when you're paying school costs? If so, they should talk about looking into buying your mother long-term care insurance to pay for her care. A planner should be looking at your total picture."

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