In general, there are two primary types of investors seeking financial advisors. One is the first-time user—perhaps you are retiring and rolling money from a 401k into an IRA. Or, you are replacing a current financial advisor and don’t want to make the same mistake twice.  

Regardless of your reason for seeking a financial advisor, you should be prepared to ask them the right questions so you can make an informed selection decision. This is tougher than it may sound.  There are hundreds of thousands of advisors serving investors. Some are trustworthy financial experts, and some are not. Ideally, your screening process will separate advisors, so you only interview fiduciary financial professionals who have lived through many different types of market cycles: 

• Some may specialize in setting up comprehensive financial plans, including recommendations for optimizing spending, paying down debt, and minimizing taxes. 
• Others may focus more on wealth management and investing, emphasizing their portfolio management services. 
• A third type may be more interested in selling your investment products and being paid commissions by third parties.

Not only that, but financial advisors’ knowledge levels can vary widely based on their education, years of experience, certifications, and commitment to ongoing education. If this isn’t lax enough, there are no regulations that determine who can use the term “financial advisor” or “financial planner.”

Confused yet? This is just the beginning. To compound the challenge, this is one of the most important financial decisions you will ever make for you and your family.

Because of this, the only way you will know what a given financial advisor specializes in, how they handle advice, what their training and experience are, and how they charge for services is to ask the right questions and know good answers from bad ones. You may also want to consider requiring documentation for key responses. A written record works in your favor.

Why Are You Looking for a Financial Advisor?

Before asking questions of a financial advisor, though, you can streamline and focus your questions by asking yourself why you’re looking for a financial advisor in St. Louis:

• What has made you consider working with a financial advisor? 
• What do you want to focus on? Do you want to set up retirement plans or optimize the ones you have, for example? 
• Do you want to discuss investments? 
• Do you want help eliminating debt? 
• Do you want to ensure you save enough for your children’s (or grandchildren’s) education? 
• Do you want the financial advisor you select to complete a comprehensive review of your financial life or focus on a specific area?

You may also be looking for your first financial advisor. For example, you are ready to retire and plan to roll assets from a company 401k plan into a traditional IRA. You may be seeking a financial advisor who can provide retirement planning and investment management services. 

Or you’re replacing a current advisor. In this case, you want to ensure you don’t make the same selection mistake twice. Replacing advisors can be expensive if they do not meet your expectations.

The answers to these and other questions will help you focus on what information you want from a financial advisor. They will also help you find the best match for your particular requirements.

The following are five important questions you should ask financial advisors:

1. What are your sources of financial expertise? 

Many financial advisors claim to have experience in both financial planning and investment management. They should be able to document how they became experts in these areas.

Ask about their college degrees, schools they attended, majors, years of applicable experience, and certifications – for example, CFP® ––(CERTIFIED FINANCIAL PLANNER™). 

You may also want to know their work histories and reasons for making changes.  It’s also a good idea to ask if the financial advisors have specialized experience working with people similar to you. 

Some financial advisors will work with anyone who meets their minimum requirements. Other advisors specialize in working with particular types of investors, such as pre-retirees and early retirees. 

For example, if you are a baby boomer about to retire, you may not want to select a financial advisor who works with millennials. You expect the advisor’s specialized knowledge to benefit you.

Many financial advisors specialize in serving particular age groups or levels of net worth on the premise they have similar requirements. Some emphasize the importance of beliefs and values when they provide financial advice and services.  Others may work with business owners about to sell their companies and retire. , 

2. Are you an acknowledged fiduciary? 

Fiduciaries are held to the highest ethical standards in the financial industry. They must always put your best interests ahead of their own when they provide financial advice. 

This may sound like common sense, but not all financial advisors are held to this standard. 

Therefore, it pays to ask and require a documented response.  It is important to note that some financial advisor designations, like CFP®s, must be fiduciaries. 

Other types of financial advisors who sell investment products for commission are held to what is known as the suitability standard. They must recommend investments suitable for your current circumstances, goals, and risk tolerance.  

While they may be ethical advisors, they are not required to put your financial interests above their own. You should ask why they are not financial fiduciaries.

3. What’s your investment strategy?

Investing strategies vary widely. Based on their current knowledge, a financial advisor should be able to describe how they will invest your money. Generally, a prudent strategy will start with understanding your particular goals and tolerance for risk. Then, they should be able to describe a prudent investment strategy based on this information. 

A qualified financial advisor should also be able to explain common concepts in investing, such as asset classes, diversification, active versus passive, and rates of return. If you don’t feel comfortable with the explanation or don’t understand what is being said, that is a good reason to exclude the advisor from your search.

Even though you are not a financial expert, you should feel comfortable with the information being provided to you. Assuming you are interviewing multiple financial advisors, you should select the advisor who makes the most sense during your interviews.   

4. How will we work together?

Financial advising firms also vary widely in how they work with their clients. Some work only online in virtual offices serving clients who may be hundreds or thousands of miles away – inside or outside the U.S. Some prefer to meet face-to-face when the advisor and client are in the same city.  Some advisors are sole practitioners, while others work in teams of professionals. 

5. How are you compensated?

Financial advisors have several different compensation methods. 

A fee-only financial advisor, for example, will charge a fixed fee, an hourly rate, or a fee that is a percentage of your assets. 

Other advisors who are not fiduciaries are paid commissions by third parties to sell their products. 

An example of a third party could be a broker/dealer or a mutual fund family. Some financial advisors are hybrids who can receive fees and commissions for their advice and services. 

Keep in mind you want five types of information:

• What fees, commissions, and other expenses will be deducted from your accounts?
• Who is paying the financial advisor, and for what?
• What do you receive in return for the fees and commissions?
• Are there any potential conflicts of interest?
• Will the advisor submit this information in writing?

Trinity Wealth Advisors: Your Financial Advisors in St. Louis

At Trinity Wealth Advisors, all our partners are CERTIFIED FINANCIAL PLANNERS® with an average of 25+ years of experience. We work with affluent clients who share our strong Judeo-Christian values. Our partners employ a team approach that lets our clients benefit from their combined knowledge in investments, financial planning, tax, retirement,, estate planning, and more. 

We work with you to develop personalized strategies that are based on your specific circumstances, goals, and tolerance for risk.