How to Find a Trustworthy Financial Planner or Advisor?

What to Look for and What’s Not Important

If you are shopping for a financial advisor, you need a good checklist of questions to ask. What you are looking for is someone who handles clients like you – and who is financially wise.

As you assess an advisor who manages your assets, for instance, do yourself a favor: Don’t rely on his or her investment record. Clients have differing needs. A money manager whose investment performance touched the stars last year may falter this year.

More important nowadays is how skillful an advisor is at preserving your assets. That may range beyond market forecasts into such realms as insurance. Losing the ability to work and generate income, because of a sudden disability, can be more ruinous to your financial well-being than a slide in the stock market. This list of questions to a prospective advisor will help you decide whether the person is the right fit for you:

What Don’t You Do?

Some advisors are strictly asset managers. They run your portfolio and do no planning. Others are wealth managers and their mandate is broader: They plan the risk in your life. Within these categories are specialists in such areas as insurance and estate planning. You may hire an advisor to draw up an investment plan aimed at gathering enough assets to see you through retirement. But the advisor may know zilch about creating a trust to pass along wealth to your grandkids. So, you will need another expert for that.

Who Is Your Typical Client?

Let’s say you are starting out and have a net worth of $50,000. It may not make sense for you to hire an advisor who typically handles multi-millionaires. You may want to find an advisor who focuses on your occupation. Say you are a doctor: An advisor who knows about malpractice insurance and practice partnerships could be better for you than one who mainly deals with corporate executives. Or you may want an advisor specializing in your life stage. Perhaps you are widowed, a new parent, or divorced.

What Clients Don’t You Want?

One advisor may not want anyone with under $100,000 to invest. Another may want only those people. Beyond asset size, goals and styles also are important.

What Is a Recent Client Success Story?

Showing clients how to unknot a problem, protect against calamity or enhance their holdings are key ways that advisors help out. If a prospective advisor can point to specific stories where he or she fostered a client’s success, it gives you comfort the advisor can aid you too.

What Is the Worst Thing You Have Seen Someone Do Financially?

To err is human. Sometimes, an advisor is called in to repair problems people have created for themselves. Sometimes, clients go against an advisor’s counsel and drive into a ditch. Clients, after all, are not required to follow professional financial advice. This question helps you gauge an advisor’s nose for trouble.

Believe it or not, there are advisors who told their clients to retreat into defensive positions prior to the 2008 market debacle, to lighten up on debt, or to back out of heavy real estate exposure. On a smaller scale, a sharp advisor may warn clients to avoid dumb moves like keeping most of their assets in employer shares or chasing hot stock tips.

Bottom Line

Asking a prospective financial advisor these questions will help shape your decision as to whether you can work together. And remember, it is a partnership.