10 Questions to Ask Prospective Advisors

1. What is your professional background (go back 5- 10 years)?

Look for experience, credentials, financial education and a commitment to the industry;
Identify their “expertise” and identify whether or not this fits with your stage in life.

2. Will you provide a customized investment plan?

Some advisors work off “model” portfolios or allocation recommendations – decide if this is appropriate for you or if you require more flexibility and customization.

3. What are the costs involved with planning and implementing with you?

Try to understand each possible cost including advisory fees, transaction costs, separate account manager fees, mutual fund loads, mutual fund expense ratios, mortality expenses and other professional fees. Ask for full transparency of all investment and planning costs.

4. How are you compensated?

Ask your prospective advisor to describe all forms of compensation including client fees, referral fees and commissions. Understanding how an advisor is compensated will help you better understand his/her point of view when making recommendations.

5. What process do you follow to help me define and implement my goals and objectives?

An important part of working with an advisor is compatibility. Try to understand your advisor’s work-style and whether or not it is compatible with yours.

6. What is your relationship with other professionals?

Make sure your prospective advisor is willing to communicate and work with other professionals to achieve your goals (e.g. accountants, attorneys, insurance agents). Building a core team of professionals not only saves you the hassles of coordinating planning issues, but ensures everyone is looking out for your best interests.

7. Do you provide referrals to other professionals?

Your advisor may be a one-stop shop or may refer out for various services. Regardless, make sure your service needs can be met and that your entire team is qualified to address your unique circumstances.

8. How do you maintain your technical knowledge?

Many designations require “Continuing Education”, however, other ongoing activities are also important. Look for someone who attends seminars, reads, and networks.

9. Where will my investments be held and what is the cost structure?

Some advisors require that you hold all your investment accounts with a specific brokerage firm or bank. Others allow you to maintain accounts wherever you prefer. What is important to you? What does it cost?

10. Will you help maximize my after-tax returns?

An often overlooked detail, the tax cost basis of your investments directly impacts your tax planning. New Federal regulations require custodians to begin tracking this information going forward, but what about legacy positions purchased years ago or even inherited? Additionally, your tax situation may impact specific investment choices. Ask prospective advisors how they utilize tax information to make investment decisions - do they invest with an eye for tax-efficient investing?

Download Schwab's Guide to Choosing the Right Advisor