These lists have been done before, and they can be so damn generic. They were almost certainly written by someone that has never actually worked as an advisor or planner, or just didn’t want you asking deeper questions. Make sure you ask exactly in the order below, because there is an intentional flow to it. Some of these are going to be offensive to my colleagues1… *shrug*. Here we go.
1- What is your favorite thing about what you do?
Every advisor expects to be asked about fees or experience first. This will surprise them. Most will say they enjoy helping people, or the freedom that the profession gives them. I love those things too, plus lots of other things. My favorite thing, though- watching people grow through life. I get to see them get married (I even officiated a client wedding!), have kids, get promoted, start businesses, and finally retire. Much like the stock market, life isn’t linear; they get divorced, lose loved ones, lose their job, and worse. I love being there for all of it, cheering them on.
If you don’t hear some passion, get the hell out.
2- What is your least favorite thing?
If their answer isn’t paperwork or compliance, they are fucking liars. Even with paperwork being digital these days, it still sucks.
3- What made you become an advisor?
There’s no right or wrong answer to this one, but you will probably find that most people just kinda “fell” into it. It might be a really neat story. I will share mine some other time, but here is the short version- baby Kyle2 went to advisor, and was laughed out of the room because I didn’t meet investment minimums. That made me become obsessed with personal finance and investing, and eventually became one myself3.
4- Do you manage your money the same way you do for clients?
When I was working at my second firm, I was pitching to a prospective client an in-house mutual fund that I was told to push, I was asked how much of my money I had in that fund. That was a damn good question, and the answer was $0. Once I went independent, I made sure that I could answer that question with a straight face.
5- Do you do tax planning?
This one is going to hurt some feelings… but if they don’t do tax planning, they aren’t a real advisor. Pretty much everything you do with your money touches the tax code in one way or another, and you need to know how that impacts you both in the short and long term.
Tax planning differs from tax prep in that it is forward looking. Ultimately, the goal should be to lower the tax burden over the course of your lifetime, not just any one year.
6- What are your other services? Do you have a niche or specialty?
There is a whole host of services an advisor may provide, but make sure they do the ones relevant to you. If you have kids, college planning may be important. If you are getting ready to retire, Social Security planning can add hundreds of thousands of dollars of income across your retirement.
Niches and specialties are also becoming more common. There is one advisor whose niche is professional bass fishermen. Personally, my niche is high income Millennials4 and business owners, and specialize in taxes, investments, and business planning. I also work with people outside of that niche, but if you fit that is who I serve best.
7- What is your service model?
If most of the industry was honest, they would tell you that they will take your money or sell you products, then do as little as possible until they can sell you something else5. The largest clients are obviously treated better, but the biggest issue is that most people don’t even know what they should expect. After the initial 3-4 meeting planning process, I typically meet with clients 1-4 times per year to cover any relevant topics. I do have different service models for different types of clients and engagements.
8- Do you have investment or fee minimums?
I hate to burst your bubble, but you get what you pay for. If an advisor doesn’t have some sort of minimum, you are either going to get shit service, or pitched some sort of insurance product you probably don’t need. Because of my experience described above, I have fee minimum rather than investment minimums. That ranges from $1,200/year to $12,000 a year, depending on the complexity.
9- Do you have any disciplinary infractions?
Actually, don’t even bother asking this question. Go to brokercheck.finra.org and adviserinfo.sec.gov and look them up. If anything shows up, cancel the meeting.
10- How much of your compensation comes from commissions?
Usually for articles like this, they lead with the question, “are you a fiduciary6?” Unfortunately, that question is more complicated than it should be. Instead, ask if they are an investment adviser or a broker, or both (hybrid). The former gets paid fees for a service, the latter gets a commission for selling products. I am personally of the opinion that commissions create a harmful conflict of interest, but I do know hybrid advisors that do great work for clients. I started on the hybrid side, but personally will never go back. If less than 10% of their compensation comes from commission, they might not be so bad then.
Kyle Thompson, MBA, CEPA
Founder/Lead Advisor
The content contained herein is intended as education and entertainment, and does not constitute investment, tax, or legal advice. Please consult the relevant advisor before making any decisions. Additionally, any opinions expressed here are solely those of the author, and do not represent the opinion of Leetown Advisors or its affiliates.
1 Fuck ‘em.
2 Just out of college.
3 My career path up to that point was much more interesting.
4 If you were born between 1981 and 1996, that is you!
5 This is pretty much every large firm that is a household name. That is how they got so big in the first place.
6 Technically, everyone is a fiduciary, but investment advisers are so on behalf of the clients, while brokers are so on behalf of their broker dealer or insurance company.
