A couple I know hired a financial advisor at their bank because it felt safe. Trusted institution, professional office, firm handshake. Over five years, they paid $47,000 in fees on a $400,000 portfolio, and their investments underperformed a basic S&P 500 index fund by 2% annually. They didn’t know the advisor earned commissions on every product he sold them. They didn’t know he wasn’t a fiduciary. They didn’t know what a fiduciary was.
That’s the problem. Most people don’t know the right questions to ask a financial advisor before handing over their life savings. The financial industry makes this confusing on purpose. Titles like “advisor,” “consultant,” “planner,” and “wealth manager” sound similar but carry wildly different legal obligations and compensation structures.
These 18 questions cut through the noise. Ask them all, compare the answers, and you’ll know exactly who’s working for you and who’s working for their own commission check.
Before You Meet with a Financial Advisor
A small amount of preparation prevents you from getting sold a product instead of receiving real advice.
- Define your goals. Are you saving for retirement, building an emergency fund, paying off debt, planning for a child’s education, or managing an inheritance? Your goals determine what type of advisor you need.
- Know your numbers. Gather your income, expenses, debts, savings, retirement account balances, and investment holdings. An advisor can’t help you without a clear picture of where you stand.
- Understand basic fee structures. Financial advisors charge fees in three main ways: a percentage of assets under management (AUM), flat or hourly fees, or commissions on products they sell. Knowing these models helps you evaluate what you’re being charged.
- Research the advisor’s background. Check their record on FINRA BrokerCheck (brokercheck.finra.org) and the SEC’s Investment Adviser Public Disclosure database. Both are free and take 2 minutes.
- Prepare your questions. Print this checklist and bring it to your meeting. A financial planning workbook can help you organize your goals and track your progress between meetings. A good advisor welcomes tough questions. A bad one gets defensive.
Fiduciary Duty and Legal Standards
1. Are you a fiduciary, and will you put that in writing?
This is the single most important question on this list. A fiduciary is legally required to act in your best interest. A non-fiduciary advisor only needs to recommend products that are “suitable,” which is a much lower bar. Suitable means “not completely wrong for you.” That’s a far cry from “best for you.”
If the answer is anything other than an immediate, unqualified “yes,” you’re talking to a salesperson. Ask them to sign a written fiduciary pledge or confirm it’s in their advisory agreement. Some advisors act as fiduciaries for investment advice but switch to a lower standard when selling insurance products. Pin down exactly when and how the fiduciary duty applies.
2. Are you a registered investment advisor (RIA) or a broker-dealer representative?
RIAs are registered with the SEC or state regulators and are held to the fiduciary standard. Broker-dealer representatives are regulated by FINRA and historically held to the lower suitability standard (though Regulation Best Interest, effective since 2020, raised the bar somewhat).
The distinction matters because it affects how they’re compensated and whose interests they prioritize. RIAs typically charge fees (AUM-based or flat). Broker-dealer reps often earn commissions on the products they sell you. There’s nothing inherently wrong with either model, but you need to know which one you’re dealing with.
3. Do you or your firm have any conflicts of interest I should know about?
Every advisor has some conflicts. The question isn’t whether they exist, but whether the advisor will tell you about them voluntarily.
Common conflicts: proprietary products (their firm earns more when they sell in-house funds), revenue sharing (fund companies pay their firm for shelf space), and higher commissions on certain products. An honest advisor discloses these upfront and explains how they manage them. Ask specifically: “Do you receive higher compensation for recommending certain products over others?” The answer should be straightforward.
Fees and Compensation
4. How exactly do you get paid?
Get a complete picture. Most advisors use one or more of these models:
- Assets Under Management (AUM): Typically 0.5% to 1.5% of your portfolio annually. On a $500,000 portfolio at 1%, that’s $5,000/year.
- Flat fee or retainer: A set annual fee, usually $2,000 to $7,500, regardless of portfolio size.
- Hourly fee: $150 to $400 per hour for specific planning needs.
- Commission: Earned on products sold to you (mutual funds, insurance, annuities). This is where conflicts of interest most commonly hide.
Some advisors use hybrid models. A fee-based (not fee-only) advisor charges AUM fees and earns commissions. “Fee-based” and “fee-only” sound similar but are very different. Fee-only means they never earn commissions. Fee-based means they can and sometimes do.
5. What is the total cost of working with you, including fund expenses?
Your advisor’s fee is only part of the cost. The investments they recommend carry their own expenses. Mutual fund expense ratios, trading costs, platform fees, and account maintenance fees can add another 0.2% to 1.5% on top of your advisory fee.
Ask for the “all-in cost,” which means their fee plus average fund expenses. If your advisor charges 1% and puts you in funds averaging 0.75% in expenses, your total cost is 1.75% annually. On a $500,000 portfolio, that’s $8,750 per year. Over 20 years with compounding, that cost difference can reduce your ending balance by $200,000 or more compared to a low-cost approach.
6. Is there a minimum investment requirement?
Many advisors require minimums ranging from $100,000 to $1,000,000+ to take on a new client. Others have no minimum or work with clients at lower asset levels for a flat fee.
If you’re earlier in your wealth-building journey, look for fee-only planners who charge hourly or flat fees rather than AUM. You’ll get the same quality advice without needing a six-figure portfolio. The NAPFA and Garrett Planning Network directories are good places to find these advisors.
Investment Philosophy and Approach
7. What is your investment philosophy?
You need an advisor whose approach matches your values and risk tolerance. There’s a wide spectrum: passive index investing, active stock picking, tactical asset allocation, alternatives and hedge funds, ESG-focused investing, and many variations.
What matters most is that they can articulate their philosophy clearly and support it with evidence. If an advisor says “we pick the best investments based on our proprietary research,” ask for their track record. If they favor low-cost index funds, ask how they add value beyond what you could do yourself (tax-loss harvesting, rebalancing, behavioral coaching, financial planning integration).
Be skeptical of any advisor who promises market-beating returns. Decades of data show that the vast majority of active managers underperform their benchmark index after fees. An advisor who’s honest about this is actually the one most likely to help you build real wealth.
8. How will you construct and manage my portfolio?
Specifics matter here. Ask about asset allocation (stocks versus bonds versus alternatives), diversification strategy, how they select individual investments, rebalancing frequency, and tax efficiency.
A solid answer includes: a diversified allocation based on your goals and risk tolerance, low-cost index funds or ETFs as a core holding, systematic rebalancing (quarterly or when allocations drift beyond a threshold), and tax-aware strategies like asset location (putting tax-inefficient investments in tax-advantaged accounts).
If the answer involves frequent trading, concentrated stock positions, or complex products you don’t understand, ask why those approaches are better than a simple, low-cost, diversified portfolio. The burden of proof should be on complexity, not simplicity.
9. How do you measure and report investment performance?
You need to know whether your portfolio is actually performing well or just benefiting from a rising market. Ask how they benchmark performance. Your returns should be compared to an appropriate benchmark (not cherry-picked) and reported net of all fees.
Also ask how often you’ll receive performance reports and what format they’ll take. Good advisors provide clear, readable reports quarterly and are transparent about both good and bad periods. If they only highlight their winners, that’s a problem.
Credentials and Experience
10. What professional credentials do you hold?
Not all financial designations are created equal. The landscape is cluttered with impressive-sounding titles that require minimal education. Here are the ones that actually mean something:
- CFP (Certified Financial Planner): Requires extensive coursework, a rigorous exam, 6,000+ hours of experience, and ongoing ethics requirements. The gold standard for comprehensive financial planning.
- CFA (Chartered Financial Analyst): Three-level exam series focused on investment analysis and portfolio management. Strong credential for investment-focused advisors.
- CPA/PFS (CPA Personal Financial Specialist): A CPA with additional financial planning specialization. Excellent for tax-integrated planning.
Be wary of advisors whose primary credential is a weekend certification or a designation you’ve never heard of. Ask where they earned it and what it required.
11. How long have you been advising clients, and what’s your typical client profile?
Experience matters, but fit matters more. An advisor with 25 years of experience serving retirees with $5 million portfolios might not be the right fit for a 35-year-old building wealth on a $90,000 salary.
Ask: “Describe your typical client.” If the answer doesn’t sound like you (similar income, assets, life stage, goals), the advisor may not be equipped to address your specific needs. Also ask how many clients they serve. An advisor managing 300 clients is spread thinner than one managing 75.
12. Can you share references from clients in a similar situation to mine?
References should come from clients whose circumstances resemble yours. A glowing reference from a retired CEO doesn’t tell you much about how the advisor serves young professionals or small business owners.
Ask the reference: “What has this advisor done for you that you couldn’t have done yourself? How do they handle market downturns? Are you confident you understand the fees you’re paying?”
Services and Communication
13. What services do you provide beyond investment management?
Investment management is only one piece of a financial plan. The best advisors also cover: retirement planning and projections, tax planning and coordination with your CPA, estate planning guidance, insurance review, education funding strategies, debt management, and Social Security optimization.
If you’re paying 1% of your portfolio for someone who only picks investments, you can get the same result from a robo-advisor for 0.25%. The human advisor’s value comes from comprehensive planning and behavioral coaching. Make sure you’re getting both.
14. How often will we meet, and how do you communicate between meetings?
Expect at minimum two face-to-face or video meetings per year: a comprehensive annual review and a mid-year check-in. Many advisors offer quarterly meetings and are available by phone or email between sessions.
Ask about their response time for urgent questions. A good advisor responds within one business day. Also ask whether meetings follow a structured agenda or are free-form. Structured reviews with written action items tend to be more productive than casual catch-ups.
15. Will you be my primary contact, or will I work with associates?
At larger firms, you might meet with the senior advisor during the sales process and then get handed to a junior associate for ongoing service. That’s not necessarily bad (a well-trained associate backed by a senior advisor can be very effective), but you should know in advance.
Get the name and contact information for everyone who will touch your account. Understand who makes investment decisions, who prepares your financial plan, and who answers your day-to-day questions.
Accountability and Fit
16. How will you handle it if my portfolio drops 20% or more?
Markets decline. It’s not a question of if, but when. Your advisor’s answer to this question reveals their temperament under pressure.
A good answer: “We’d review your plan, confirm your goals haven’t changed, and rebalance if your allocation has drifted. Market declines are expected and already factored into our long-term projections. My job is to keep you from making emotional decisions that lock in losses.” A bad answer involves panic-selling, dramatic portfolio shifts, or vague reassurances without a concrete plan.
17. What would cause you to recommend I fire you?
This is a trust question. An advisor with genuine confidence will tell you exactly when their services aren’t the right fit: if your situation becomes too simple, if you’re unhappy with their communication, or if your needs shift to a specialization they don’t offer.
An advisor who says “there’s never a reason to leave” is selling you retention, not honest counsel.
18. Can I see a sample financial plan?
A sample plan shows you exactly what you’re buying. It should include: a net worth statement, cash flow analysis, retirement projections, investment recommendations with reasoning, tax optimization strategies, insurance review, and estate planning considerations.
If the sample plan is a generic template with your name plugged in, that’s a concern. If it’s a detailed, customized document with clear assumptions and actionable recommendations, that’s what good planning looks like.
What to Mention or Send Beforehand
Providing these details before your initial meeting results in a much more productive conversation.
- Your financial goals ranked by priority. Retirement, home purchase, education funding, debt payoff, or whatever matters most. Ranking helps the advisor understand where to focus.
- A current snapshot of your finances. Income, expenses, debts, savings, retirement accounts, brokerage accounts, and real estate equity. Even rough numbers are better than nothing.
- Your current investment holdings. Account statements from retirement plans, brokerage accounts, and any other investments. The advisor can evaluate your existing positions before the meeting.
- Your tax situation. Last year’s tax return or at least your filing status, income, and marginal tax bracket. Tax planning is inseparable from investment planning.
- Any specific concerns or questions. If you’re worried about a pending inheritance, a job change, or whether you can retire at 55, mention it upfront so the advisor comes prepared to address it.
Typical Cost Range and Factors
Financial advisor costs vary based on the fee model, your portfolio size, and the services provided. Here’s what’s realistic in 2026.
Assets Under Management (AUM) Fees:
- 0.5% to 1.5% of portfolio value per year
- $500,000 portfolio at 1% = $5,000/year
- $1,000,000 portfolio at 0.75% = $7,500/year
- Rates often decrease at higher asset levels (breakpoints)
Flat Fee / Retainer:
- $2,000 to $7,500 per year for comprehensive financial planning
- Best for clients who want planning without portfolio management or who have lower asset levels
Hourly Fees:
- $150 to $400 per hour
- Good for specific projects (retirement analysis, tax planning review) rather than ongoing management
Commission-Based:
- Varies by product. Mutual fund front-end loads of 3% to 5.75%. Insurance commissions of 50% to 100% of first-year premium. Annuity commissions of 4% to 8%.
- The cost is real but hidden in the product price. You don’t write a check, but you pay through higher expenses.
Robo-Advisors (for comparison):
- 0.25% to 0.50% of portfolio value per year
- Automated investment management without comprehensive planning
Total “All-In” Cost (advisor fee + fund expenses):
- Low-cost approach: 0.5% to 1.0% all-in
- Moderate-cost approach: 1.0% to 1.75% all-in
- High-cost approach: 1.75% to 3.0%+ all-in
The difference between 1% and 2% all-in cost on a $500,000 portfolio over 25 years (assuming 7% market return) is roughly $300,000 in lost growth. Fees are the most reliable predictor of investment returns, because they’re the one thing you can control.
Red Flags vs. Green Flags
| Red Flag | Green Flag |
|---|---|
| They won’t confirm fiduciary status in writing. If they hedge, qualify, or say “it depends,” they’re not a full-time fiduciary. | Immediate, unqualified “yes” to the fiduciary question with willingness to put it in their advisory agreement. |
| Vague fee explanations. If you can’t get a clear answer on total cost within the first meeting, the fees are designed to be confusing. | Transparent, written fee schedule provided upfront with a clear explanation of all-in costs including fund expenses. |
| They guarantee returns or promise to “beat the market.” No one can guarantee returns. Anyone who does is either lying or selling a product with hidden risks. | Honest about market uncertainty. They focus on what they can control: fees, diversification, tax efficiency, and behavioral discipline. |
| Heavy use of proprietary products. If most of your money goes into their firm’s own funds, they may be prioritizing firm revenue over your returns. | Uses a mix of low-cost funds from multiple providers based on quality, not firm affiliation. |
| No written financial plan. If their service is limited to “managing your investments” without comprehensive planning, you’re overpaying for something a robo-advisor does cheaper. | Comprehensive written financial plan covering investments, taxes, retirement, insurance, and estate planning with regular updates. |
| Reluctance to share their ADV Part 2. This SEC-required document discloses fees, conflicts, and disciplinary history. If they won’t share it, there’s something in it they don’t want you to see. | Proactively provides their ADV Part 2 and walks you through the key sections before you sign anything. |
Money-Saving Tips
- Start with a fee-only fiduciary. Fee-only advisors never earn commissions, so their recommendations are unbiased. The NAPFA directory (napfa.org) lists fee-only advisors searchable by location.
- Negotiate the AUM fee. Advisors with published rates of 1% will often come down to 0.75% or lower for larger portfolios or long-term commitments. The worst they can say is no.
- Use a flat-fee advisor if your portfolio is under $250,000. AUM fees on smaller portfolios often don’t justify the cost. A flat-fee planner charging $3,000/year provides the same comprehensive advice without the percentage drag.
- Ask about fund expenses. Insist on low-cost index funds and ETFs with expense ratios under 0.20%. The difference between a 0.10% and a 0.75% expense ratio on $500,000 over 20 years is roughly $65,000.
- Use a robo-advisor for simple needs. If you just want automated, diversified investing without comprehensive planning, a robo-advisor at 0.25% delivers solid results at a fraction of the cost.
- Check for tax-loss harvesting. This strategy offsets gains with losses to reduce your tax bill, and it can add 0.5% to 1.0% in annual after-tax value. Make sure your advisor actively does this if you have a taxable account.
- Don’t pay for services you don’t use. If your advisor’s plan includes estate planning reviews but you never update your estate plan, you’re paying for something that sits on a shelf. Align the service level with what you’ll actually use.
Quick Reference Checklist
Fiduciary and Legal
- Confirmed fiduciary status in writing?
- RIA or broker-dealer registration verified?
- Conflicts of interest disclosed?
Fees and Compensation
- Fee structure clearly understood (AUM, flat, hourly, commission)?
- Total all-in cost calculated (advisor fees + fund expenses)?
- Minimum investment requirement?
Investment Philosophy
- Philosophy clearly articulated and evidence-based?
- Portfolio construction approach explained?
- Performance measurement and reporting process?
Credentials and Experience
- Relevant credentials verified (CFP, CFA, CPA/PFS)?
- Experience and typical client profile align with my situation?
- References from similar clients contacted?
Services and Communication
- Services beyond investment management confirmed?
- Meeting frequency and communication expectations set?
- Primary point of contact identified?
Accountability
- Market downturn strategy discussed?
- Honest about when their services aren’t the right fit?
- Sample financial plan reviewed?
Glossary
Fiduciary: A person or entity legally obligated to act in another party’s best interest. In financial advising, a fiduciary must prioritize your financial well-being above their own compensation. Not all financial advisors are fiduciaries, which is why asking is so critical.
Assets Under Management (AUM): The total market value of investments that an advisor manages on behalf of their clients. AUM-based fees are calculated as a percentage of this amount. As your portfolio grows, so does the dollar amount you pay in fees.
Fee-Only Advisor: An advisor who is compensated exclusively through fees paid directly by clients (AUM, flat fee, or hourly). They never receive commissions, referral fees, or other compensation from third parties. This model has the fewest inherent conflicts of interest.
ADV Part 2 (Form ADV): A disclosure document that SEC-registered investment advisors must provide to prospective clients. It details the advisor’s services, fees, investment strategy, conflicts of interest, and disciplinary history. You’re entitled to this document before signing an advisory agreement.
Expense Ratio: The annual fee that mutual funds and ETFs charge investors, expressed as a percentage of assets. An expense ratio of 0.10% means you pay $1 per year for every $1,000 invested. Low-cost index funds typically have expense ratios of 0.03% to 0.20%.
CFP (Certified Financial Planner): A professional designation requiring completion of a college-level education program in financial planning, 6,000+ hours of professional experience, passing a comprehensive exam, and adherence to ethical and fiduciary standards. Widely regarded as the highest standard for financial planning professionals.
Helpful Tools and Resources
Store your financial plan, tax returns, insurance policies, and investment statements in a fireproof safe. Protects irreplaceable financial documents from fire, water, and theft.
Keep your net worth statements, budget worksheets, and advisor meeting notes all in one place. A dedicated financial binder makes annual reviews much more productive.
A simple filing cabinet or desktop file box gives you a permanent home for tax documents, investment statements, and insurance policies. Beats the junk drawer approach by a mile.
- FINRA BrokerCheck - Free tool to research any financial advisor’s registration, employment history, certifications, and disciplinary actions. Takes 2 minutes and should be your first step before any advisor meeting.
- SEC Investment Adviser Public Disclosure - Search for registered investment advisors and access their Form ADV filings, which disclose fees, services, and conflicts of interest.
- NAPFA Find an Advisor - Directory of fee-only financial advisors who have pledged to act as fiduciaries. Searchable by location and specialization.
- Garrett Planning Network - A network of fee-only financial planners who charge by the hour, making professional advice accessible without minimum asset requirements.
Frequently Asked Questions
Do I need a financial advisor, or can I manage my money myself?
It depends on your complexity and confidence. If your financial situation is straightforward (steady income, employer 401k, no major life transitions) and you’re willing to learn the basics of investing, a DIY approach with low-cost index funds and a robo-advisor can work well. If you’re dealing with complex tax situations, stock options, inheritance, business ownership, or retirement planning with multiple income sources, a good advisor typically more than earns their fee.
What’s the difference between a financial advisor and a financial planner?
“Financial advisor” is a broad, largely unregulated term that anyone can use. “Financial planner” is similarly broad, but a “Certified Financial Planner (CFP)” is a specific credential with rigorous requirements. Look for the CFP designation if you want comprehensive planning. And always confirm fiduciary status regardless of title.
How much money do I need to hire a financial advisor?
It depends on the fee model. AUM-based advisors often require $100,000 to $500,000 minimum. Flat-fee and hourly advisors typically have no minimum, making them accessible at any wealth level. Some newer firms and robo-advisor hybrids serve clients with as little as $5,000 to $25,000.
How do I know if my financial advisor is doing a good job?
Measure against three criteria: (1) Are your investments performing reasonably relative to an appropriate benchmark after fees? (2) Are they providing comprehensive planning beyond investment picks? (3) Are they proactively communicating and adjusting your plan as your life changes? If the answer to any of these is no, it’s time for a conversation or a change.
Can I switch financial advisors, and what does the process look like?
Yes, you can switch at any time. The new advisor handles most of the paperwork through an account transfer (ACAT). The process typically takes 5 to 10 business days. Watch for any exit fees or surrender charges on products the old advisor sold you. And get a clear picture of tax implications before transferring taxable accounts, because selling positions to transfer can trigger capital gains.
Disclaimer: This article is for educational purposes only and does not constitute financial, investment, or tax advice. Financial advisor selection, fee structures, and investment strategies vary based on individual circumstances. Consult with a qualified financial professional before making investment decisions. Information reflects general guidance as of early 2026 and may change.