Financial Advisor

Questions To Ask A Financial Advisor

Better to find out sooner rather than later!


Questions To Ask A Financial Advisor

As an investor seeking a financial advisor, you probably have held multiple meetings prior to making your selection. You may have even searched the Internet for the best questions to ask a financial advisor. And ultimately, you must make a choice. But what is most important?

You have trusted your hard-earned assets and retirement hopes to an advisor, and now you talk quarterly or annually about the S&P 500, the price of oil and interest rates. Perhaps you leave feeling confident in the advisor’s intellect and firm capabilities, but what about your financial future and your retirement goals?

How To Choose A Financial Advisor / Planner
The recent volatility in the stock market has again become a wake up call to many investors.  A lot of Americans have short memories when it pertains to investing and we are observing this all over again.  Bear market corrections are a reality.  16 times in the last 90 years with an average decline of -38%!  The last two being closer to a 50% drop states Jack Reutemann, CEO of Research Financial Strategies.  Are you mentally prepared if the market repeated itself again and you end up losing 40% of your investments?  Denial that another bear market will sooner or later occur is NOT the answer.  A competent advisor’s job is to keep you safe and stop you from making bad, emotional, panic based decisions.  And keeping your head in the sand is not the answer either.  You need to ask yourself and your current investment advisor some tough questions that may make you both uncomfortable.

Questions To Ask A Financial Advisor, Financial Advisor Questions, Investment Questions, Financial Advisor, Retirement Advisor

First, is your “advisor” a real advisor?
Are they an employee of a big Wall Street firm?  Guess what…. they work for the firm, not for YOU.    Real advisors are “fee-based”, don’t earn commissions, and are affiliated with a major custodian such as Charles Schwab.  Read your contract with your “financial advisor” and you might be alarmed to find out he or she is really a broker and NOT subject to the “fiduciary rule”.  If they are selling you proprietary mutual funds, then most likely it benefits the house much more than their client, the individual investor.
Many individuals are under the impression that financial advisors only make money if the investor makes money.  This is not true. Many investment sponsors pay advisors handsomely just for putting them into a specific fund or product.

Is your advisor a mutual fund “pie charter”?
This is a dead giveaway that you are not working with a real fee-based advisor.  Real advisors don’t put their clients in mutual fund pie charts.  If you own mutual funds recommended by your advisor, ask him “why, and how do you get paid?” Most mutual funds funds are sold with a load. Most of these funds are sold through brokers. The load pays the broker for his efforts and gives an incentive to suggest a particular fund for your portfolio. This financially benefits your broker and not you! Plus, most big name, large brokerage house push their own proprietary funds which are more profitable for them and rarely beat the S&P 500 benchmark. In most cases, their advisors are pushed by management to sell these exclusive products which arguably benefit the brokerage more than the investor.

Is your advisor a “set it and forget it” broker?
“Buy and hold” is NOT an investment process.  It is a scheme to make mutual fund companies and broker/dealers big fees.  Here is the biggest question your current advisor doesn’t want to hear from you:  “When we have the next “bear market”, and the S&P Index potentially falls -40%, what is your plan to protect me?”  You will be shocked by the answer most financial advisors and brokers give, or lack of one.  A recent survey by a major financial advisory publication reported that 82% of advisors and brokers had no risk management plan in place for the next bear market correction².

“Do you have a risk management plan for the next -40% correction?”
It is amazing that so many investors own luxury autos with anti-lock brakes, air bags, lane change motion sensors and the like, and yet their portfolio has no safety features built in. You have to ask yourself “how much am I willing to lose if the market goes into a correction?”. The buy and hold story that allows you to dollar cost average the equities you purchased at their highs is just a way to emotionally ease your pain but not a real solution.

Here’s a really tough oneWas your current advisor/broker even in business in 2008?
Over half of Wall Street advisors have less than 10 years’ experience.  If your advisor has been in business over 10 years, ask him the following question:  “Between October 10, 2017, and March 6, 2009, how much of your clients’ money did YOU lose???”  Don’t back down, demand an answer.

Are you invested in mutual funds?
Research from USNews has shown that mutual funds offer the same return as their ETF peers.  Mutual Funds charge higher fees and yet their returns aren’t any better than ETFs.  If you have a $200,000 portfolio, just a 1% difference in fees compounded over 20 years at 7% will cost you over $87,000!
Read more: ETF vs Mutual Funds >>

Using a financial adviser is a smart idea if you are unsure of how to manage your investment portfolio, retirement accounts or don’t know what to do with a large inheritance.  However, not all financial advisers are created equal, and some might be trying to line their own pockets with commission-based product sales rather than give you the best advice for your investment and retirement.

Ready to Make a Change?

With an “education first” approach, Research Financial Strategies ensures that our clients understand how their money is being invested, and we guide the development of financial plans that help them achieve their goals for personal wealth and retirement security.


2273 Research Blvd, Suite 101
Rockville, MD 20850


(301) 294-7500