If you’re contemplating hiring a financial planner or advisor or if you’re currently working with one, here are some fair and important questions you may consider asking him or her.

1. Are you a fiduciary? Being a fiduciary means that the adviser must legally act in your best interest. While not an absolute guarantee that the advisor will never act otherwise, most advisors who are fiduciaries embrace the responsibility – they want to be fiduciaries. Any other answer then yes to this question means you need to keep searching for an advisor who is.
2. How are you paid? Generally, three different answers will follow. It will either be fee-only, fee and commission, or commission. If the advisor says fee-based or salary, you’ll want to dig deeper. These two responses don’t say how the compensation is derived. More importantly, you want to know how you will pay the advisor. And if you’re curious, exactly how much. Fee-only means the advisor is compensated directly from you, the client via hourly, retainer, or asset under management fees. Fee and commission is a combination of asset or hourly fees and commissions from product sales. Commission is derived from the sale of products. If the advisor is unsure – move on.
3. What value do you provide relative to the money you’re paid? Like the questions says, this is relative. Cheap to one person may be expensive to another. Regardless of how much is paid, make sure you’re receiving value. If you’re unsure, ask the adviser to write it down for you. Good advisors may well be worth the money you pay – and then some.
4. What are your credentials? Ask your advisor what credentials and education they have obtained to be able to work with you and your situation professionally. Many advisors have designations and some will also have degrees specific to financial planning. Degrees specific to financial planning include bachelor’s and Master’s degrees in financial planning or services, consumer finance, wealth management, and family economics among others. Specific designations to financial planning include the CFP® and ChFC®. The CFP® is considered the gold standard in financial planning designations.
5. What conflicts or potential conflicts of interest exist? If the advisor only gets paid if you’re sold a product, that’s a conflict. If they only get paid if you move assets to their firm, that’s a conflict. Conflicts are everywhere. They should and need to be disclosed – preferably in writing. Ask your advisor how he or she will mitigate or avoid conflicts of interest. If the conflicts are incongruent with your beliefs and values, find an advisor that is a better fit. It’s important to note that just because there’s a conflict does not mean the advisor is wrong or unethical.

Hopefully these questions will help provide a baseline to start the conversation with your advisor. Surely more will arise in your conversations, and that’s to be expected.