A. It is a good idea to interview no fewer than three advisors before you make a selection. You are choosing a person whom you must trust, and whose advice you will be willing to follow. Therefore, the personal chemistry between you must be one that fosters trust. Here are some guidelines you can follow:

Question the advisors during your interviews. Ask about the advisor’s performance results for his/her clients. Ask where the advisor obtains technical information to support his/her work.

Ask about the advisor’s licenses. To give investment advice, an advisor must be registered with the Securities and Exchange Commission (SEC) or a state securities department. If the advisor sells or places products pursuant to your plan, s/he must be licensed by (1) a state insurance department (insurance and annuities), (2) a state securities department (mutual funds, limited partnerships, etc.), or registered with a member of the National Association of Securities Dealers (NASD) (securities). Is s/he a Registered Investment Advisor? An explanation of some of the various licenses held by financial planners can be found a few questions down in this section. Ask if the advisor has ever been fined, reprimanded, or suspended. Verify the answer by contacting your state securities department, state insurance licensing/regulation department, the National Association of Securities Dealers (NASD), and the U.S. Securities and Exchange Commission (SEC).

Ask about the advisor’s education and credentials. Does the advisor keep up to date in the field through continuing education? There are many capable advisors who perform excellent service for their clients, some who have earned one or more designations, and some who have not. Ask if the advisor holds a credential such as Certified Financial Planner®, Certified Public Accountant, or Chartered Life Underwriter? If so, the planner is subject to the ethical requirements of the credentialing organization as well as varying degrees of continuing professional education. For information about what the many credentials mean, click here. You may contact the credentialing organizations to determine if the advisor’s designation is still valid and if there have been any ethical sanctions placed on the advisor.

Ask for the advisor’s references. It is reasonable for you to speak with current clients and other financial professionals (such as accountants or attorneys with whom s/he has worked). Ask to see samples of financial plans that s/he has developed for other clients in circumstances similar to yours, and for circumstances that you aspire to achieve.

Ask the advisor if s/he will be recommending a full range of financial products from a variety of financial service companies, or only those of a single company.

Ask the advisor about fee arrangements. Advisors are compensated by hourly fee, project fee (e.g. the drafting of a financial plan), management fee (generally 1.5% of invested balances under management), commission (paid by the financial company issuing the mutual fund or insurance policy), or by a combination of these methods (e.g. fee plus commission).

Finally, be prepared to give the advisor enough information about yourself to allow him/her to make the decision to accept you as a client. Just as the match with an advisor must be right for you, many advisors find that they do their best work when they are equally thorough in their selection of clients.

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