Financial Advisor or Financial Planner? Here are 7 Important Questions to Ask

Why It Matters:

  • Some types of financial professionals can do more for you than others
  • Not understanding the difference between an advisor and a planner can affect the value of your portfolio
  • Know the 7 important questions to ask a prospective financial professional

Jeff Maciolek tkc.profilePicture Written by: Jeff Maciolek | Transamerica
July 22, 2019

3-4 Min readClock Icon

So you’ve finally done it. You’ve decided to do the adult thing and get your financial life in order and get professional help. But where to start? The financial industry is full of fancy titles and mystifying acronyms. You probably don’t even share your finances with relatives, and yet you’re going to trust a complete stranger with your entire financial life to help you pursue your financial goals — right after you figure all of them out.

Getting started

The first thing to look at is the difference between a financial advisor and a financial planner. They aren’t necessarily the same thing.

Financial professionals

A Financial Professional a broad term for a professional who helps manage your money. This can be a stockbroker, accountant, banker, investment advisor, or even an attorney. There’s no regulatory guidance or rules on using the title. Essentially, anyone can hang a sign on the door and call themselves a “financial advisor” with very few qualifications. Advisors tend to sell products they represent or know, rather than the very best option available.

Financial planners

A financial planner tends to analyze every aspect of your financial life, including savings, investments, taxes, retirement, insurance, and estate preservation.1 In fact, a financial planner is a type of financial advisor, but a financial advisor may not be a financial planner. Confused? There are a lot fewer people qualified to be financial planners than there are financial professionals. Think of it as hiring a life coach versus a psychiatrist. One may take a lot more education and experience than the other.

Certifications to look for

Financial planners will usually have one or more certifications after their name. That means they may have more training and may commit to continuing education on financial matters and ethics. One of the most significant certifications to look for is CFP®, which stands for Certified Financial Planner™ and can be verified here . It can be a good sign they will give sound financial advice.

Other validating certifications to look for are: Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), and Certified Investment Management Analyst (CIMA). Each of these licensures requires a planner to complete a different course of study, exams, and other requirements.

Why should you consider using a financial advisor?

The internet certainly makes it tempting to be a do-it-yourselfer when it comes to managing your money. But mastering personal finance and investing requires countless hours of schooling, research, and experience. That’s why people spend years studying to get their degrees.

Doing-it-yourself probably isn’t worth your time unless you’re already pretty financially savvy. Getting a second opinion on your financial plans is typically a good idea. You’ve probably done it with getting your car fixed or a medical procedure. Your finances are just as important. Plus, having someone keep you from getting off track can help even the most disciplined investor.

What to ask a prospective financial professional

When you start looking around, there are a number of important questions to ask a prospective financial professional. These questions can help you select a professional that is right for you. Most professionals welcome being questioned to help get your relationship off on the right foot and be as transparent as possible. Here are some questions to ask a prospective candidate:

1) Are you a fiduciary? This is the single most important question you can ask a prospective financial professional. A fiduciary means the advisor has to act in your best interest, as opposed to merely offering suitable products. If you don’t get a clear yes or no answer here, it might be a good idea to keep looking elsewhere.

2)  How do you make money? A majority of fiduciaries will charge a flat or hourly fee, or they’ll have an easy-to-understand fee based on the total investment amount they are managing for you.

3)  What’s included? This is really to make sure there won’t be any extra fees and explore what kind of access you’ll have to your advisor. Is it a once-a-year meeting or can you call or email outside of scheduled appointments? Will you get tax advice or assistance with planning for college or your estate? It’s usually helpful to know what you’re getting for your money.

4)  What’s your education and experience? Are you getting a Harvard-educated advisor or someone who did all of their schooling online at an unaccredited, unknown institution? Are they also an attorney or a CPA? What other certifications and training do they have? How long have they been in the business? It’ll give you a better idea of their experience and what kinds of boons and drops they’ve seen in the market.

5)  Do you have a minimum portfolio size or fee? Find out the typical size of their clients. You want to be sure they’ll work with someone like you. Bigger firms may not touch anyone with less than $500,000 of investable assets to manage. And even if they are willing to work with smaller portfolios, can you be sure they’ll give you the attention you and your money deserve?

6)  Who else will work on my finances? If the advisor has a team that supports him or her, they should be willing to introduce these people and tell you what kind of access they have to your personal information. They should also have an independent custodian who holds your investments, rather than acting as their own custodian. This way you can go online and verify everything your advisor tells you about your account.

7) What types of investments will my portfolio contain and what benchmarks do you use? It can be a good idea to know what kind of investments your advisor typically employs. It’s likely made up of stocks, bonds, ETFs, and mutual funds. But if they’re really pushing you to invest in beachfront property in Kansas — think twice. They should also use industry benchmarks that relate to what they’re invested in to measure performance. Beware of advisors promising huge returns and the ability to beat the market.

The bottom line

While researching a good financial professional may sound like a lot of work, in the end, it’s worth it. A bad one can cost you your life savings. Just ask Bernie Madoff’s victims. Whereas, a responsible one can help you better navigate the complicated world of investing and tax implications. This can help you reach your financial goals even sooner than planned.

Don’t be afraid to ask too many questions. Make sure you know who is investing your money, their professional background, and how much it will ultimately cost you. Understand what kind of access you’ll have to them and what you’ll be invested in. After all, it’s your money.

Things to Consider
  • Before you meet with anyone, think about your financial goals and what you want the financial professional to help you plan for
  • Know the difference between a financial advisor and a financial planner
  • Ask friends or coworkers for referrals
  • Ask lots of questions to know who and what you’re paying for


1 “Financial Planners,” U.S. Securities and Exchange Commission



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