This is Part 2 of the blog series “How To Select a Financial Advisor” – see Part 1 here.

Once you’ve selected a few financial advisor candidates you think are worth greater consideration, you may go into their office or meet them somewhere mutually convenient.  I personally think getting face-to-face is important here.

2) Interview qualified financial advisor candidates

He’ll want to learn about you and some of your hopes, goals, and why you came in today.  He’ll give you his spiel about what he does, why he does it, the difference they make for their clients, etc.

But it’s an interview for him as much as anything.  When we meet, here are the questions I want full, clear, understandable and satisfactory answers to, long before I think about signing anything:

How are you paid?
Most advisors are going to be paid a yearly percentage of your total assets that they manage for you.  This is fine.  Generally, you won’t write him a check; that will come out of the fees that whatever mutual funds you own charge.  (Choosing share types is outside the scope of this article.)

What is your education and experience?
For me, he doesn’t necessarily have to have a degree in finance or business, but it helps.  Extra points for the CFP (Certified Financial Planner) designation, but it’s still possible to invest successfully with someone if he doesn’t have it.  I would like for them to have some experience, but if someone has big green lights on every other criteria but they’re young, I wouldn’t have a problem going with them.

Personally, our financial advisor was fairly young when we started with him – nearly our age five years ago.  I didn’t mind that, because having had a relationship with him prior to him becoming our advisor, I knew him well, understood his investment philosophy, and he had great credentials while working at an established wealth management group.  He hit all the other criteria for us, so the age wasn’t a factor.  If you’re in North Carolina, I certainly recommend him.

How much in assets do you manage currently?
This is indicative of the amount of time he’s been in the field and how well he’s done serving clients up to this point.  I’d want a guy that’s managing at least $5 million.  I don’t have any industry statistics there, no research; I’m just thinking of what it would take for him to feed his family.

BIG ONE: If the market is on fire, similar to circa 2008, and I call you wanting to get out, what do you say?
Correct answer: He would do everything in his power to help you stay the course that you advisedly and soberly (and correctly, I might add) chose before the financial markets went crazy.

What makes you different from the other financial advisors out there?
This might be a little dirty; it’s kind of a trick question fishing for red flags.  Personally, I don’t want him pulling any fancy tricks with my money.  I want him to bring good experience and knowledge to the table, but I don’t want something super fancy/new/experimental.  If he starts talking about proprietary modeling software, investing algorithms, or something else I have a hard time understanding, it might be a red flag.

If you’ve found a couple candidates to interview, hopefully these questions will help.  But it’s not everything you need to be armed with.  Wait to schedule your meeting with your candidates until you see Part 3 of this series: “When to Run,” coming up in a few days.

Question: What other questions do you ask your financial advisor?