When you plan for retirement, finding a good match in a financial advisor can be confusing, and even daunting if you are comparing financial professionals when your finances are becoming complex. 

As a wealth advisor here in the Tri-Cities, I have been asked great “interview” questions by clients when they were comparing advisors and firms. 

Based on some of those questions from clients, I would like to share examples of these questions and what people can or should learn from the answers to those questions. 

Q: How do I pay a financial advisor? 

Mostly when people ask this, they want to know what it costs to have someone manage their investment assets for them. Some advisors or firms charge a flat fee according to number of hours. Many firms, including ours, charge a percentage of the amount a client invests. 

An asset-based fee generally rises or falls with the value of assets under management. This structure means that the firms’ compensation correlates with the assets managed on behalf of clients. 

There are several things here I would strongly encourage people to compare: a firm or advisor’s philosophy and process; historical results; and fees, which includes a record of returns net of fees. (keeping in mind that past performance does not guarantee future results). From those comparisons, you can learn a lot about what advisor or firm might be the best fit. 

Q: How many client meetings do you average in a week? 

Prospective clients often are very perceptive about how to evaluate the depth and scope of a financial planning relationship. Client engagement is a factor for potential clients to consider when evaluating a financial planning relationship. So if you are comparing an advisor who has two to three client meetings a week with an advisor who averages more than 10 per week, then I would recommend comparing what else is different in the way that they serve clients. 

Q: What’s your succession plan?

Again, this question can lead to very helpful information. Evaluate the response that you get. Financial planning involves all sorts of plans, including making plans for critical scenarios in your life. Ironically, some firms are not as good at having plans in place for themselves, and it’s a huge topic in the profession. We do so much work with multi-generational planning, and clients rightly expect that of us, so it’s more than fair to ask how an advisor’s client service is going to continue. 

Q: What does “fiduciary” mean for financial advisors? 

The title “fiduciary” can apply legally to a range of financial agents, including executors of an estate, attorneys and more. For us in the financial advising industry, though, since the enactment of the Investment Adviser Act of 1940, two types of relationships have existed between financial intermediaries and their clients. 

These are the “reasonableness standard” and the “fiduciary standard.” Advisors registered with the Securities & Exchange Commission (SEC) as registered investment advisors are required to adhere to the fiduciary standard. You might see businesses that market additional designations related to the fiduciary standard, but these legal requirements apply to all advisors registered with the SEC and the legal requirements of the fiduciary standard are enforced under the auspices of the SEC. 

Q: What professional designations do you have and what skills do they indicate? 

Prospective clients want to know about expertise beyond legal requirements. Sometimes they are looking for something very specialized to their situation, but the most widely recognized is the certified financial planner certification. To become a CFP professional requires specific coursework, capped by a six-hour final exam, as well as thousands of hours of professional experience related to the financial planning process.

The CFP Board administers the certification process and also enforces the requirements for professionals to continue holding the designation through ethical standards, continuing education and more.

Q: What is your investment strategy and what is your process for developing and implementing it? 

With this question, prospective clients evaluate whether a firm’s investment approach is meeting their stated objectives. At our firm, investment strategy is developed and implemented internally, so our investment team develops the strategy and implements the trades. We report to our clients every quarter and the team meets every week with more updates. Anyone can read the team’s blog and use that as an example to make comparisons. If an advisor is using a company’s models or products, then there is another layer or more. So do explore how that contributes to your success. 

Questions like these hopefully help give those of you concerned about planning for retirement some ideas for seeking out a financial advisor who will be a good fit for you. Everyone’s situation is unique, but comparing advisors and firms can help you understand what options and tools are available to you. In my work, I have seen how this choice has consequences for years to come and even across generations, so we are honored to help anyone find the most beneficial fit for them.

Nick Mercer is a certified financial planner and wealth advisor at Piton Wealth in Kennewick.