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AARP Interview an AdvisorTM helps you understand the advisor’s credentials, compensation and how to get the conversation started.
By continuing with this tool, you agree and understand that AARP is not providing financial advice or recommending any individual financial advisor. The selection of a financial advisor is a personal decision that should be made after careful consideration of your individual financial situation.
By continuing with this tool, you agree and understand that AARP is not providing financial advice or recommending any individual financial advisor. The selection of a financial advisor is a personal decision that should be made after careful consideration of your individual financial situation.
Our “gold standard” concept is for people who are looking for substantial advice and guidance from a personal financial professional. This guidance uses the term “advisor” to describe this type of professional relationship.
Investment professionals generally come in two varieties; registered investment adviser representatives and broker-dealer agents. As is explained in more detail below, registered investment advisers typically offer a greater depth of services and advice than broker-dealer agents, and are an appropriate choice for someone looking for substantial investment advice and account monitoring. On the other hand, if you are simply looking to buy or sell stocks, for example, you can readily find a broker-dealer to execute your transaction. Read on, and apply the “gold standard” if you are looking for advice and guidance from a personal financial professional.
Client-Advisor Relationship
There are many types of financial professionals who call themselves “advisors,” but different standards of conduct often apply. An advisor who is held to the highest standards will have a duty of loyalty and care to their clients. Find out what state, federal or industry standards of conduct your advisor is governed by and ask how they plan to fulfill that commitment to you. The standards under which your advisor operates should:
When and how a financial investment professional — such as a registered investment adviser representative or a broker-dealer agent — looks out for your interests differs depending on the services you request, the type of account you have and the legal requirements that apply to their registration. So make sure you ask enough questions to understand exactly what kind of professional you are dealing with, what services the advisor does and does not provide, what kinds of fees and commissions the advisor charges, and what conflicts of interest the advisor may have when providing services and advice.
Registration, certifications and designations
Experience
Due to the complexity of investments and financial markets, you may want to work with someone who has weathered the ups and downs of the market. Find out how long the advisor has been practicing. If the person is managing your investments, consider whether an advisor who has experience with an economic downturn is important to you. If other areas of financial planning are more pressing to you than investing, then find an advisor who has successfully served clients in your areas of need.
Services
Comprehensive financial planning, if that is what you seek, includes but is not limited to:
Be sure that the advisor offers the services that are suitable to your needs.
Fees
A financial advisor should be able to clearly explain their compensation model to you. Beyond the fee-only model, many advisors work on a commission basis. This means the person will receive some compensation by buying and selling particular investment products from other companies. If the advisor you choose is commission-based, make sure the advisor explains what this entails and how it might influence their recommendations.
The fee structure in the financial advisory world is evolving, so you may see alternative compensation models as you research advisors. The important thing is that the advisor is able to clearly communicate in plain language how you pay them, any other compensation that may be received, and what it means to you.
Conflicts of Interest
An advisor should avoid conflicts of interest or fully disclose the conflict of interest and properly manage the conflict. Feel free to ask your advisor if they expect to have any conflicts of interest throughout your working relationship.
Written Plan
A full-service financial advisor, for example, will provide additional services beyond buying or selling securities on your behalf, such as providing advice and a written analysis of your personal financial situation. It should be a red flag to you if the advisor you currently work with, or someone you are considering, will not provide a written analysis.
Meeting Frequency
An annual review is a best practice for advisors. You may meet more frequently, including leading up to, during or following a major life event. Whether it is quarterly, annually or some other time frame, it’s important to know how often you’ll meet with the advisor so you both have the same expectations. If you have an idea of how often you need to meet to be comfortable with the service you pay for, discuss this with your advisor.
Disciplinary Action
The U.S. Securities and Exchange Commission, your state securities regulators and the Financial Industry Regulatory Authority (FINRA) provide free reports on the disciplinary history of financial advisors. You can and should follow up with these authorities to verify whether there's a history of disciplinary action or customer complaints.
Understand the difference in financial professionals.
“Broker-dealer" and "registered investment adviser" are terms defined in federal and state securities laws, and they define the legal obligations of these professionals. Other optional titles may relate to certifications and designations the advisor has earned.
Broker-dealers and registered investment advisers may have similar roles, but there are important differences. Some of the key differences are highlighted in the chart below.
Provide a wider variety of services, including investment advice and account monitoring.
Often work under a flat fee or a fee based on a percentage of the assets they manage for you.
Are required by the Investment Advisers Act of 1940 to act in a fiduciary capacity — under which they must act in their clients’ best interests.
Investment advisors monitor and manage their clients' assets on an ongoing basis and, therefore, their fees are typically higher than those of broker-dealers.
Usually provide services on a transaction-by-transaction basis, such as arranging purchases and sales of different types of investments.
Often work on commission, meaning they earn income when buying and/or selling certain products from a company.
Broker-dealer agents may be required to follow the standard of conduct defined by the SEC, which incorporates fiduciary principles but does not require them to act as a fiduciary in all circumstances.
While broker-dealers provide fewer services to investors, their fees can be more cost-effective, especially to the investor who may only need transactional or occasional services.
The process of finding a financial advisor to work with can seem overwhelming and intimidating. Our guide takes the mystery out of what questions you should ask when you interview an advisor. In preparing for your consultation with your advisor, please use the following steps:
You may go to an advisor with an open mind to hear about services, but you’ll want to think about how an advisor will be most beneficial to you. Here are some subjects for you to consider when thinking about how to use your advisor.
Be sure to know what your financial success looks like to you. You want an advisor who will work in your best interest, make decisions in your best interest and make decisions with your goals in mind. Having an advisor who helps you craft your goals and ensure that they are realistic can be beneficial as well. But it’s important that the advisor is starting the consultation with what you want instead of selling you services and products that do not match your desired short-, mid- and long-term outcomes. Take time to think about what you would like to accomplish financially over the next year, five years and/or a longer time frame. Your advisor may challenge you on some of your goals, which is fine. But be sure that they lead with understanding your goals.
A.
A. View the advisor’s website to gain an understanding of services and designations. Research designations to understand the advisor’s value and how they are regulated.
B.
B. Be aware of which services the advisor offers directly and which are outsourced. For example, will the advisor manage your investments or use a third-party company for your investments? If so, you may be paying additional fees for this service.
C.
C. Ascertain the number of years the advisor has been providing financial planning or investment advisory services.
D.
D. Find out what licenses and designations the advisor holds, and do research to understand what they mean.
E.
E. Determine which services the advisor provides that are high priority for you.
F.
F. Search online for reviews of the advisor or the firm they represent.
G.
G. The Securities and Exchange Commission, your state securities regulators and the Financial Industry Regulatory Authority (FINRA) provide free reports and information on the disciplinary history of financial advisors. You can — and should — follow up with these authorities to verify whether there's a history of disciplinary action or customer complaints, which are potential red flags. Any details that you can’t find on the site, add to the questions you plan to ask in person.
Ask the advisor the following questions during your in-person or phone meeting. Feel free to add or omit questions based on what you’ve learned from previous research on the advisor.
Think back on your meeting and see how the advisor performed against these criteria.
Your advisor's score matches the Gold Standard, meaning that the advisor upholds the highest standards of care in this category.
Your advisor meets some of the qualifications for upholding the highest level of care in this category.
Your advisor does not meet the qualifications for upholding the highest level of care in this category.
Client-Advisor Relationship
1. Will the advisor place your interests above their own interests and above those of the firm the advisor represents?
Yes
No
2. Does the advisor commit to act with care, skill and diligence with regard to your goals and personal circumstances?
Yes
No
Registration/certifications
1. Is the advisor accountable by law or by standards of certification to act in your best interests as a fiduciary?
Yes
No
2. Is the licensing issuer held accountable by a governing body?
Yes
No
Experience
1. Is the advisor experienced in weathering ups and downs in the market?
Yes
No
2. Do they have experience with customers in similar financial situations as yours?
Yes
No
Services
Provides comprehensive financial planning, which includes but is not limited to:
Does the advisor provide comprehensive financial planning, if that is what you seek? This includes but is not limited to:
Estate Planning
Yes
No
Insurance Planning
Yes
No
Investment Planning
Yes
No
Retirement Planning
Yes
No
Tax Planning
Yes
No
Conflicts of Interest
Avoids conflicts of interest or discloses and manages any conflicts.
Has the advisor disclosed and managed any conflicts of interest?
Yes
No
Written Plan
Written plan provided.
Will a written plan be provided?
Yes
No
Meeting Frequency
At least annually
Does the advisor plan to meet with you at least annually?
Yes
No
Disciplinary Action
None
Has the advisor faced any disciplinary action?
Yes
No
An email will be generated with all preselected questions that you can copy and send to your advisor.
Experience and working relationship
Services and Products
Compensation
Good day, _____________, Thank you for taking the time to meet with me to discuss the ways in which we can work together. After our consultation, I have a few additional questions to gain clarity about your service offerings: