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Questions to Ask of Financial Advisors

The questions clients actually ask, from fees and fiduciary duty to succession planning

By Piton Wealth
Image courtesy of Piton Wealth.

Finding a good match in a financial advisor can be confusing, and even daunting if you are comparing financial professionals when your finances are becoming complex. A local Wealth Advisor, Aaron Ells CFP® at Piton Wealth in Kalispell, told us that his team has been asked great “interview” questions by clients when they were comparing advisors and firms. Based on some of those questions from clients, Aaron answered with examples and what people can or should learn from the answers to those questions.

Q: Let’s start with one I’m sure everyone wants an answer to: How do I pay you?

Aaron Ells

Aaron Ells: Mostly when people ask that, they want to know what it costs to have us manage their investment assets for them. Some advisors or firms will charge a flat fee according to number of hours. Many firms, including ours, charge a percentage of the amount a client invests (you can find the chart of our fees on our website). We prefer that, because then our success tracks with that of our clients, because our revenue increases if the returns increase. One thing I would strongly encourage people to do is compare a firm or advisor’s record of returns net of fees. If you pay less in fees, but you get lower returns than with someone else with higher fees, you could miss out on potential growth of your assets. No one can guarantee results, of course, but I think it’s worth making that comparison.

Our other service is Financial Planning, and with that we assess every client’s situation and declare up front what the fee will be for a given year. We really believe in the value of comprehensive financial planning, so we encourage people to really look under the hood when comparing services advertised as financial planning.

Q: You recommend “looking under the hood” to compare financial planning services. How do they do that?

Aaron Ells: I’ve noticed that clients who ask a straightforward question like “How many client meetings do you average in a week?” often are very perceptive about how to gauge successful financial planning. That’s because quality financial planning involves a lot of direct engagement with clients. So if you are comparing an advisor who has 2-3 client meetings a week with an advisor who averages more than 10 per week, then I would recommend comparing what else is different in the way that they serve clients.

Q: So related to that, should clients expect to meet a certain number of times in a year?

Aaron Ells: Initially, when you are just starting with an advisor, there should be a cluster of meetings, for sure. At Piton, clients might settle into what we call “Achieve” meetings, where we make sure to have regular updates. More importantly, though, ask whether the engagement is not only ongoing but constant. If we know of something happening that affects clients, we don’t wait until the next scheduled meeting to reach out. If something happens with a client, we want them to inform us so we can take action when we need to. All that is a part of what really makes financial planning successful.

Q: At this point, you are talking about both an advisor and their team support. Should a prospective client ask about that?

Aaron Ells: Absolutely. Does your advisor have team support? Is your advisor the team all by themselves? Is the person with the title of advisor really more a support person in the team? Definitely ask to find out. In our case, we demand that a Wealth Advisor is experienced and credentialed. Our Wealth Advisors then are constantly working with up-and-coming advisors and experienced financial paraplanning professionals, and beyond them by a tightly-knit team. Ask about team culture. If your advisor or main contact at a firm cannot function for some reason, that team has to be able to step up.  

Q: That was actually my next question. What about succession planning for a wealth management firm? How does someone ask about that?

Aaron Ells: Exactly like that: “What’s your succession plan?” Evaluate the response that you get. Listen, financial planning involves all sorts of plans, including making plans for critical scenarios in your life. Ironically, some firms are not as good at having plans in place for themselves, and it’s a huge topic in the profession. We do so much work with multi-generational planning, and clients rightly expect that of us, so it’s more than fair to ask how an advisor’s client service is going to continue.

Q: Earlier you referred to scaling your fees to your clients’ returns. Is that because you act as a fiduciary? And what does “fiduciary” mean for Financial Advisors?

Aaron Ells: Yes, we act as fiduciaries, and I’d like to say a bit more about that. The title “fiduciary” can apply legally to a range of financial agents, including executors of an estate, attorneys and more. For us in the Financial Advising industry, though, since the enactment of the Investment Advisers Act of 1940, two types of relationships have existed between financial intermediaries and their clients. These are the “reasonableness standard” and the stricter “fiduciary standard.” Advisors registered with the Securities & Exchange Commission (SEC) as Registered Investment Advisors are required to adhere to the stricter standard, so that’s us. You might see businesses that market additional designations related to the fiduciary standard, but these legal requirements apply to all advisors registered with the SEC and the legal requirements of the fiduciary standard are enforced under the auspices of the SEC.

Q: What other terms or titles do clients ask you about?

Aaron Ells: They want to know about expertise beyond legal requirements. Sometimes they are looking for something very specialized to their situation, but the most widely recognized is the CERTIFIED FINANCIAL PLANNER® certification. To become a CFP® Professional requires specific coursework, capped by a 6-hour final exam, as well as thousands of hours of professional experience related to the financial planning process. The CFP Board administers the certification process and also enforces the requirements for CFP® Professionals to continue holding the designation through ethical standards, continuing education and more. At Piton Wealth, to use the job title of Wealth Advisor, the advisor must hold at least the CFP® certification. Until they do, they are part of the support team for the Wealth Advisors.

Q: OK, let’s bring this full circle back to the first question. A client is paying you for an investment strategy, but how do they know what they are getting for their money?

Aaron Ells: Just ask! “What is your investment strategy and what is your process for developing and implementing it?” Ask what makes that successful for you. If an advisor is using a company’s models or products, then there is another layer or more, so explore how that contributes to your success. At Piton we prefer to do that in house, so our Piton Investment Team develops the strategy and implements the trades. We report to our clients every quarter and the Team meets every week with more updates. Anyone can take a look at their blog and use that as an example to make comparisons.

Q: Thank you! Where can people find more information, and more questions to ask?

Aaron Ells: We have a free, public newsletter which focuses on exactly that, so anyone can access those (link below). Call us at the office, too. When someone calls, we are committed to making sure that they have the right next step. I also promise you will talk to a person, not an AI chatbot.

Disclosures: Investment advisory services offered through Thrivent Advisor Network, LLC., a registered investment adviser and a subsidiary of Thrivent. Advisory persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Piton Wealth and Thrivent Advisor Network, LLC are not affiliated companies. Information in this message is for the intended recipient[s] only. Please visit our website pitonwealth.com for important disclosures.

The material presented includes information and opinions provided by a party not related to Thrivent and Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities or services. Thrivent and its affiliates accept no liability for loss or damage of any kind arising from the use of this information.

The above content is sponsored by Piton Wealth. To learn more about sponsored content, email [email protected].