Top 18 Financial Advisor Interview Questions You Must Prepare 24.May.2024

If you are older, you may want a younger adviser who will outlive you. If you are young, you may want an older adviser who has been through difficult economic times.

Some advisers only take high-net-worth clients. That may not be suitable for you.

Good responses include index funds, real-estate investment trusts (REITs), highly rated bonds, certificate of deposits (CDs) and a portion of money markets. Be cautious when the replies seem to promote managed funds, individual stocks, a directly owned real-estate property, reverse mortgages, commodities, long short funds, partnerships of any kind including master limited partnerships (MLP), options, hedge funds, investments with limited withdrawal privileges, collectibles, thinly held securities, and annuities with high costs and lots of fine print that provide flexibility for the insurer but not you.

Also be VERY cautious about replies that imply the adviser can do much better than the S&P 500 index with the adviser’s selection of equities. Very few professional beat the index, and it’s rare when they beat it for several years in succession.

If you believe you wouldn’t understand the responses, take someone with you or try to remember the responses and talk to a knowledgeable person later.

I personally don’t think they should because I believe a home is an investment of last resort, perhaps convertible to a reverse mortgage when elderly at which point it is a debt, not an investment.

Costs are likely to be the lowest from fee-only advisers who don't take commissions, don’t get rewards for selling particular funds, don’t receive 12b-1 kickbacks, don’t sell funds with front-end or back-end loads. They also advocate low cost providers like Vanguard, Fidelity TIAA-CREF, or T. Rowe Price, recommend broad market index funds or exchange-traded funds (ETFs), and have low turnover to minimize trading and brokerage costs.

The average mutual fund cost is 1.25%. Low cost funds have costs less than 0.5% of the investment balance each year. Broad index funds, based on major market indexes like the Standard & Poor’s 500 Index SPX, +0.46% which has stock in 500 of the largest U.S. companies, and the Russell 2000 Index RUT, +0.55% which has stock in 2000 of smaller companies, bought from low-cost financial firms can be significantly lower. Costs are in addition to an adviser’s fee.

This useful page on the Financial Planning Standards Council site reports recent disciplinary actions.

Again, I don’t think they should because the discounted value of all future payments is huge in comparison to the size of most people’s savings. Since financial advisers are prone to classify such “investments” as fixed-income, that me your savings would have to be 100% equities, a decidedly risky position.

Neither will give you a perfect wer. Constant returns and inflation in forecasts don't include the effects of a retiree having to make a withdrawal in a down market year. In contrast, Monte Carlo computer models vary returns every year using statistics of the past in numerous iterations. Some vary inflation too. Monte Carlo analysis gives a “success probability” assuming that the statistics of the future will be the same as the past, something that many forecasters believe doubtful.

William Bernstein, a highly respected analyst and author, suggests using no more than a 6.5% return for equities and 3% for bonds. With results from my own programs, I lean toward using the actual returns and inflation for each year starting with 1965 because I feel we will face similar conditions with periods of high inflation and serious volatility.

Since none of us can really forecast the future, what’s important is to do a new forecast each year using the most recent balances and future events as you see them at the time to adjust your savings or spending accordingly. Future events should include the need for some long-term-care and death of a spouse with consideration to survivor benefits.

Services could include retirement planning, manage securities, estate planning, tax planning, insurance, long-term-care advice, newsletters, and so forth.

Experience counts a lot in the financial field, especially the experience gained in periods with plunging markets.

The more equities, the higher the risk. Younger people can employ a higher percentage of equities because they usually have higher long-term returns but comes with more volatility.

  • You ought to think about what kind of wers you would want before the interview. Then, as you get responses from the advisers, you’ll have a better idea whether this adviser is suitable for you and may be a better fit than the others you are considering.
  • Your first visit should be free. You may want to make a phone call or two afterward to clarify a point or cover something you forgot. If you are corresponding by email, make sure that you set up a personal, face-to-face meeting at the adviser’s place of business as well. If you feel quite uncertain about making an adviser decision, perhaps you can bring a trusted friend, relation or associate with you.
  • It really pays to do due diligence to find an adviser. It’s much like a marriage in which separation or divorce may be difficult. That’s particularly true when the adviser has control of your account (instead of requiring your approval before any buy or sell action), provides multiple services in addition to financial planning such as estate planning or income taxes, invests in funds available only to his firm or gives you scanty periodic information. The easiest relationship to sever is one where the adviser gets together with you periodically to look at your investments and tax return, recommend changes and wer questions. So instead of being like a spouse, the adviser is more like a marriage counselor.
  • Finding a good financial adviser is more difficult than finding a good doctor but will be truly rewarding. I can attest to that from my own experience from just several hours of financial conferences about forty years ago.

You will want to know the number and skills of associates, whether this is a stand-alone firm or part of a large company, the amount of money they have under their control, the kind of clients they serve, and who will help when the person you are interviewing isn't available.

1 through 4 would be a satisfactory wer while a number 5 through 10 implies that the adviser thinks he can foretell the future and even its timing.

Look for a Certified Financial Planner (CFP), likely with Registered Investor Advisor (RIA) credentials. Some Certified Public Accountants (CPA) with Personal Financial Assistant (PFS) degrees have suitable qualifications as well. Avoid brokers, insurance agents, real-estate promoters, business associates, relatives, golfing partners and hairdressers.

This is a legal term meaning they have a fundamental obligation to provide suitable investment advice and always act in your best interests, not theirs. They should also be willing to give you a written statement that they accept this responsibility.