Episode 71: “I don’t trust financial advisors because of bad past experiences. What questions should I ask to find the right one now?"

In this episode, we answer the question: "I don't trust financial advisors because of bad past experiences. What questions should I ask to find the right one now?"

Unfortunately, you're not alone, and this is SUCH an important topic! Firstly, NOT ALL FINANCIAL ADVISORS ARE CREATED EQUAL. There are different certifications, pay structures, and philosophies.

What questions are most critical? How do you get paid? Are you a fiduciary? What are your qualifications? What is your area of expertise? What is your investment philosophy? What services do you offer? And more...

In addition, we discuss ways someone who may feel intimidated or overwhelmed by the process can make sure they're asking the right questions without feeling out of their depth. Finding the right fit is SO IMPORTANT for your security and peace of mind.

Read the transcript

Rachael:
"Welcome back to Accessible Finance! Today, we’re diving into an issue that’s more common than you might think: how to rebuild trust in financial advisors after a bad experience. Specifically, we’re answering this listener’s question:

‘I don’t trust financial advisors because of bad past experiences. What questions should I ask to find the right one now?’

Eric, this is a tough one. A lot of people feel burned by bad advice, high fees, or even unethical behavior. Where do they start if they want to give it another shot?"

Eric:
"It’s such an important topic, Rachael, and I completely understand the hesitation. The financial advisor-client relationship is built on trust, and a bad experience can shatter that.

The first step is to realize that not all financial advisors are created equal. There are different types of advisors with different certifications, pay structures, and approaches to financial planning. Asking the right questions is key to finding someone who’s the right fit for you."

Rachael:
"Right. So let’s break this down. What’s the first question someone should ask when interviewing a financial advisor?"

Eric:
"The first question is about how they’re compensated. Ask, ‘How do you get paid?’

There are three main ways advisors get paid:

1. Fee-Only: They charge a flat fee, hourly rate, or a percentage of your assets under management. They don’t earn commissions.

2. Commission-Based: They make money by selling financial products like insurance or mutual funds.

3. Fee-Based: A combination of the two—they might charge a fee for planning but also earn commissions on products.

If you’re worried about conflicts of interest, a fee-only advisor is usually the safest choice because they’re not incentivized to sell you anything."

Rachael:
"That makes sense! So knowing how they’re paid helps you figure out if they’re working in your best interest. What’s the next question to ask?"

Eric:
"Next, ask, ‘Are you a fiduciary?’

A fiduciary is legally required to act in your best interest at all times. Not all financial advisors are fiduciaries—some only have to meet a suitability standard, which means the products they recommend just have to be ‘suitable,’ not necessarily the best option for you."

Rachael:
"Got it. So if someone isn’t a fiduciary, that’s a red flag. What else should people ask to make sure the advisor is a good fit?"

Eric:
"Here are a few more essential questions:

1. ‘What are your qualifications and certifications?’

• Look for credentials like CFP® (Certified Financial Planner), which shows they’ve met rigorous education and ethics standards.

2. ‘What’s your area of expertise?’

• Some advisors specialize in retirement planning, others in tax strategies, or working with small business owners. Make sure their expertise aligns with your needs.

3. ‘What’s your investment philosophy?’

• This helps you understand their approach to managing your money. Do they focus on low-cost index funds, or do they favor actively managed investments?

4. ‘What services do you offer?’

• Some advisors only manage investments, while others provide comprehensive financial planning, tax strategies, estate planning, and more."

5. Some other questions may be:

• How many clients do you work with?

• Will you work with me directly or will it be an associate of yours?

• Do you offer assistance with implementation of the recommendations?

• Do you receive referral fees from attorney, accountants, insurance professionals, mortgage brokers, or others?

• Are there financial incentives for you to recommend certain financial products?

• Do you offer continuous, ongoing advice regarding my financial affairs, including advice on non-investment related financial issues?

Rachael:
"Those are great! But what if someone feels intimidated or overwhelmed by this process? How can they make sure they’re asking the right questions without feeling out of their depth?"

Eric:
"That’s a great point, Rachael. Here’s my advice:

1. Write Down Your Questions in Advance:

• Having a list makes the conversation more focused and less stressful.

2. Ask for a Free Consultation:

• Most advisors offer a free initial meeting. Use that time to ask your questions and get a feel for their personality and communication style.

3. Trust Your Gut:

• If something feels off—whether it’s their answers, their attitude, or their willingness to explain things—don’t ignore that feeling."

Rachael:
"That’s so helpful! And I imagine people should also ask for references or reviews, right?"

Eric:
"Absolutely. Ask for client references or check online reviews to see what others say about their experiences. You can also verify their credentials and disciplinary history through regulatory organizations like the SEC, FINRA, or the CFP Board."

Rachael:
"Okay, Eric, let’s say someone has asked all the right questions and found an advisor they feel good about. How can they make sure the relationship stays on track this time?"

Eric:
"Great question. Building trust is an ongoing process. Here’s how to keep things on track:

1. Set Clear Expectations:

• Agree on how often you’ll meet, what services you’ll receive, and how you’ll communicate.

2. Review Regularly:

• Schedule regular check-ins to make sure your plan is on track and your needs are being met.

3. Stay Educated:

• A good advisor will take the time to explain their recommendations so you understand what’s happening with your money."

Rachael:
"That’s such a good point. It’s your money, and you should always feel empowered to ask questions and make decisions.

Eric, any final advice for someone who’s hesitant to trust an advisor again?"

Eric:
"My biggest piece of advice is this: Don’t let one bad experience stop you from getting the help you need. The right advisor can make a huge difference in achieving your financial goals. Take your time, do your homework, and don’t settle for someone who doesn’t meet your standards."

Rachael:
"Perfectly said. Listeners, have you ever worked with a financial advisor? What questions did you ask—or wish you’d asked? Let us know! Thanks for joining us on Accessible Finance!"