7 Questions To Ask a Potential Financial Advisor

by Rick Kahler

Always ask a potential financial advisor these seven questions. If a planner is offended by these questions or dances around answering them, that may be a red flag. If they answer freely, you may have found a good match. 

What’s your net worth? Financial professionals like me think nothing of asking clients this question. If the tables were turned, though, and clients or prospective clients asked the same question of us, how would we respond?

Every now and then, this issue comes up in conversations among financial planners. Some advisors think their net worth is none of their client’s business, any more than doctors’ cholesterol levels are any business of their patients.

Others are concerned that a single number like net worth is incomplete information and can even be misleading. Knowing a financial professional has a net worth of, say, five million dollars doesn’t necessarily mean the person is trustworthy or a capable financial planner. Net worth tells prospective clients nothing about where the money came from. The planner may have inherited it, won the lottery, earned it through a business other than financial planning, earned it from commissions on poor investments, or even obtained it illegally.

Nor does net worth reveal anything useful about someone’s understanding of money or knowledge of financial planning. I’ve worked with plenty of multi-millionaires who were skilled at making money but were horrible money managers and inept at investing. Even more, there are many brilliant young planners who haven’t had the time to accumulate a large net worth.

Another reason for the question may be a concern whether the planner is financially stable and will be around in the future. During the Great Recession, many financial professionals saw their revenues fall by 30% to 40%. Some who did not have a business emergency reserve had to resort to laying off staff, cutting services, or in some cases closing their doors.

Still, another concern may be whether the planner is familiar with a potential client’s particular financial issues. This is especially true of high-net-worth clients. They need to know a planner can relate to the complexities, responsibilities, and emotional challenges of managing wealth.

All of these are legitimate concerns. Knowing a financial planner’s net worth, however, doesn’t address those concerns. To discover whether a planner is a good fit for you, it would be more useful to ask questions like the following:

• Do you follow the same advice you give clients? Give me some examples.
• Do you have six months’ living expenses in an emergency account?
• Do you invest your money in the same manner you will invest mine?
• If I were to run a credit report on you, what would it tell me?
• What are some of the things you have learned from your financial mistakes?
• Tell me what your company has in place for emergency planning and succession planning.
• Tell me why you can relate to someone with my net worth and the issues I am facing.

As a prospective client, you may hesitate to ask these questions even though you want to know the answers. Don’t be shy; ask.

If a planner is offended by these questions or dances around answering them, that may be a red flag. If a planner offers answers freely and transparently, you may have found someone who provides exceptional service. Planners who share some of their own financial information are clearly committed to building the trust that is so essential between planner and client.

• Do Investment Advisors’ Credentials Matter?
• What’s Your Net Worth? (And Why Should You Care?)
• Can You Trust Your Financial Advisor?
• Do You Need a Financial Advisor In Retirement?
• How To Find the Right Financial Advisor for Your Retirement Years

Reviewed October 2023

About the Author

Rick Kahler, MSFP, ChFC, CFP, is a fee-only financial planner and author. Find more information at KahlerFinancial.com. Contact him at [email protected] or 343-1400, ext. 111.