Life Strategy: Financial Advisor Filter in 25 Questions

Over the last year, I have worked on a side project to straighten out my family’s finances and investments into a more streamlined strategy. A part of this was to determine whether I would take the DIY approach to financial management or hire a professional advisor to help make things a bit easier. After interviewing multiple advisors and wealth managers, and not hearing any compelling reason to give complete stranger access to my finances (not to mention the fees ranging from 1% — 5.25%), I came to the decision to take the DIY approach.

personal finance fintech dilbert
Fees on Fees on Fees on Fees…

If the months that followed, I received phone calls, emails, and invites to hear the latest sales pitch from the financial advisors that I spoke with previously. Each time, I would politely decline only to receive a follow up a few months later. Then I happened to read a post by Financial Samurai on questions to ask before hiring a financial advisor. After reading this excellent post, I decided to modify the list of questions and use it as a filter for any financial communications that I would have going forward.

As a software developer, IT consultant, and current student of machine learning, I see the most problems through the lens of classification or regression. The issues I was having the constant emails and phone calls was in my view a simple classification problem: where these financial advisor a) upstanding and noble advisors who had my best interest at heart, or were they b) untrustworthy at best and should not be within 1,000 ft of my money. How they responded to my questions would give the answer.

Note: Needless to say, not a single advisor has provided an answer to these questions nor have I had any follow calls or emails since sending the questions below.

  1. Are you a registered investment advisor (RIA)? An RIA has a fiduciary duty to do what’s best for their clients. RIA is different from a broker-dealer.
  2. How long have you been a financial advisor?
  3. What are your credentials? (undergrad, graduate school, certifications, online presence)
  4. Do you believe credentials matter if one has proven they can properly manage their finances over time?
  5. How long have you been in your current job?
  6. What were you doing before your current job and how long were you there?
  7. How are you incentivized?
  8. Give me an example of where you helped turn around a client’s financial situation for the better.
  9. What is your fundamental belief on asset allocation? How often? Why should we do it? What signals do you use?
  10. How would you go about building the right investment portfolio for someone 5 years, 10 years, 15 years, 20 years, and 30 years from retirement?
  11. If history has shown time and time again that the majority of active fund managers underperform their benchmarks, why do actively managed mutual funds still exist?
  12. What is your current outlook for the housing market and why?
  13. Where do you see the 10-year risk free rate going over the next several years and why?
  14. What do you think is the proper withdrawal rate during retirement?
  15. Do you think annuities a good idea for someone my age with my income stream and assets?
  16. Why do so many people bash whole life insurance policies?
  17. What is the S&P 500 currently trading at in terms of forward P/E and why do you believe the earnings estimates are achievable?
  18. Where do you see the S&P 500 or Dow Jones over the next 12 months, 24 months, and 36 months and why?
  19. If there’s a mile-long track and you completed the first lap at 30 mph, how fast do you have to go on the second lap to average 60 mph?
  20. Please explain why you are different from other financial advisors?
  21. What is an area of weakness you need to work on, and how do you plan to get there?
  22. What was your biggest financial mistake and how did you recover?
  23. Why do you think people spend more than they earn?
  24. If you were not a financial advisor, what would you be?
  25. What is the best means of communication?