#1. What is your support structure?
This question is important because it gives insight into how the advisor runs their practice. Are they a one man shop? Do they work in a team with other advisors? Do they have support staff in place to help if they are out of the office or on vacation?
#2. What is your recommendation process?
This allows you to dig a little deeper into the advisor’s philosophy. Do you want someone investing your money after filling out a 10 Question Multiple Choice Risk Tolerance Questionnaire? Will they be making recommendations in the first meeting? Do they have a process to determine the right investment mix for your circumstances or do they recommend the same products to everyone? Do they regularly review the investments and what is the process for making a change?
#3. How do you measure your performance?
Is the advisor trying to meet or beat the market index? Are they basing their recommendation on a number that you want to make? Or will they help you determine a return goal that is based on your personal need for the long term?
#4. What is your regulatory history?
Anyone registered to sell securities can be looked at on BrokerCheck at www.finra.org. There is also a link to the SEC’s Investment Advisor Public Disclosure if they are an Investment Advisor Representative which can be found at https://www.adviserinfo.sec.gov/IAPD/default.aspx. Think of this as a mini-background check. I suggest looking for patterns of disclosure events. Ask for an explanation if there is something in a pending status. The advisor may not legally be able to give specific details surrounding a pending disclosure, but you should make sure you are comfortable before moving forward.
#5. How are you compensated?
Will the advisor be charging a fee for their advice or will they be earning a commission on the products they sell? Will they be charging a fee based on the level of assets they are helping you manage, or are they charging an hourly or other rate? Is the fee tiered or is it a breakpoint? Finding out what licenses they hold will also help you determine their compensation structure regardless of their title.
#6. Who is your ideal client?
This will give you perspective into the type of people the potential advisor usually works with. If you are nearing retirement from a job at a factory, and you are speaking with someone who specializes in helping small business owners transfer their business, it might not be the best fit.
Remember, a quality advisor should be interviewing you as much as you are interviewing them. They should be taking the time to understand more about you and your situation, and how they can best help you, even if that means that they refer you to someone else.
Clearly, this is not a comprehensive list. One other aspect I find incredibly important is whether or not you like the potential advisor. This should be an interview for someone to help you through some potentially challenging times. It is important to enjoy the process as much as the end result.