The Best Way to Evaluate a Financial Advisor

It’s Not What You Ask an Advisor, But the Questions They Ask You

Toward the end of a recent conversation with a new client, I asked if she had any questions.  She looked at me and awkwardly said, “I really don’t know what to ask you.”  Later that evening, I thought more about our meeting and the best questions to ask when choosing a financial advisor.  After much deliberation, I drilled down to one concept, and it’s not a question you can ask that will give you the answer.

There are countless articles that list questions to ask, and what to look for when choosing a financial advisor.  However, none really drill down to what is most important.  While making sure they are a fiduciary, and inquiring about licensing and compensation structure are important, to me, the single greatest way to evaluate a financial advisor is not in the questions you ask them, but the questions they ask you.  In my years of working with, and as an advisor, I’ve found that the best advisors didn’t have the most licenses or a certain pay structure.  It was the ones who asked the most thought-provoking questions and really got to know the client as a person.  The most effective and purposeful advisors were giving of their attention and time.

 The purpose of the questions they ask is to help you articulate and prioritize your specific goals in life and then use your finances to try and enhance your life and happiness.  His or her thought-provoking questions allow the advisor to become your thinking partner to help you make decisions that are best for you.

 You don’t want an advisor asking if you want to buy something, or saying something like, “See me if you need X.”  Using a 529 plan as an example, you don’t want an advisor to immediately say you need one.  You want the advisor to help you determine if college savings is important to you.  If it is, then he or she should help you determine its importance to you relative to everything else you have going on, where you will pull money from to invest in that 529, and the impact of such a decision on the other facets of your financial life picture.  Only then does it make sense to discuss the merit of say, the JP Morgan 529 plan versus the Vanguard 529 plan in N.Y.   

Why do I think this is the best way to evaluate an advisor?  Because the moment you sit with them, the conversation is all about you.