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Questions to Ask a Potential Financial Advisor

What’s your net worth? Financial professionals think nothing of asking clients this specific question. If the tables were turned, though, and prospective clients asked the same type of question, how would they respond?

Some advisors may think their net worth is none of their clients’ business, just as some doctors may believe their cholesterol levels are none of their patient’s business.  Knowing a financial professional has a sizable net worth 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 may have even obtained it illegally (just saying).

Net worth may not reveal anything useful about someone’s understanding of money or knowledge of financial planning. There are plenty of multi-millionaires (doctors even) who are skilled at making money but are horrible money managers and inept at investing it.  On the flip side, there may be many brilliant young financial planners who haven’t had the time to accumulate a large net worth.

You may want to ask if the professional actually follows his or her own advice. Imagine how troubling it might be to find out your financial planner doesn’t have a retirement plan, is a habitual over-spender, or hasn’t gotten around to making a will.  Another reason for the question may be a concern whether the planner is financially stable and will be around in the future.

Another concern may be whether the financial planner is familiar with a potential client’s particular financial issues. This is especially true of a new medical resident or 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 assess whether a planner is a good fit for you, it would be more useful to ask the following questions:

  • Do you budget; if so, how and what tools do you use?
  • 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.

You may hesitate to ask these questions as a potential client even though you may 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 needed trust that is so essential between financial planner and their client.

The views expressed in this content represent the perspective and opinions of the author and may or may not represent the position of Indiana University School of Medicine.

Jose Espada

Jose Rivera Espada is the director of financial aid at IU School of Medicine, a nine-campus allopathic medical school in Indiana. Jose’s experience includes working as an assistant director of financial aid at Butler University and a financial aid coun...