1.) What is your primary function, financial planner, stockbroker, or insurance agent?
If you are looking for a financial planner, you obviously
want this answer to be “financial planner.” If the answer is
stockbroker or insurance agent, continue with the following questions
only if you are seeking just investment advice or just insurance
advice.
2.) Will you be acting as a fiduciary, always putting my interest first?
You want someone who is a fiduciary, someone who is
putting your best interests first. Most stockbrokers and insurance
agents are not fiduciaries and have a legal obligation to their firm
first, not you.
3.) Are you a Certified Financial Planner™ designee?
The CFP® designation has emerged as the premier
designation in the financial planning field, however having the
designation does not by itself assure the client that the a
representative is a financial planner - they may have the knowledge of
a CFP® practitioner but still primarily be a salesperson selling
product. This is why the other questions are important, especially
question 2.
4.) Are you process or product driven? If process driven, will you
explain your process and basic philosophy in writing?
This question should help separate the product salesperson
from the financial planner. The problem is that someone who is product
driven may be inclined to say they are process driven (remember we are
talking about being process driven with you, the client, not having a
process to sell product!). This is why it is important to have the
process and philosophy disclosed to you in writing. If someone is
truly process driven they should have the information readily
available, and be able to explain it to you easily because it would be
part of their business culture.
5.) Are you fee-only? If not, how are you compensated? Will you
provide full disclosure of any compensation arrangements in writing?
With a fee-only planner you know how much is being paid
to the advisor since they do not receive commissions or fees from any
other source. Many believe this is the cleanest way of providing
objective advice. If the planner is not fee-only, ask for (in writing)
how they are compensated and what charges you would incur on any
products that are recommended to you. With either a fee-only or other
planner, ask about any conflicts of interest.
6.) Will you disclose your background and experience in writing?
You have a right to ask for a resume on the planner you
are considering doing business with. If they are a Registered
Investment Adviser (RIA) and a principal of the firm it should be
disclosed on the brochure they are required to provide you with (Form
ADV, Part II). If it is not disclosed, request a written copy of the
planner’s background, experience, and credentials.