Knowing how to interview a financial advisor is the difference between hiring someone who fits your situation and hiring someone whose sales pitch was more polished than their credentials. A good interview covers four things: what legal standard the advisor is held to, how they get paid, where your money will physically sit, and what their regulatory record actually says. Everything else follows from those answers. This guide walks through the questions to ask, the documents to bring, and the free public tools that let you verify what you hear.
What to Bring to the Meeting
An advisor working from real numbers gives real recommendations. An advisor working from guesses gives generic advice. Before the meeting, pull together the last two years of federal tax returns, current statements for every investment account you hold (401(k), IRAs, taxable brokerage), and a summary of your monthly spending and outstanding debts. Concrete debt figures and account balances let the advisor calculate an accurate net worth on the spot.
Write down your goals with numbers attached. A target retirement age. A dollar figure for an education fund. A timeline for a property purchase. Vague aspirations produce vague plans.
Bring your estate documents too: your will or trust, any powers of attorney, and current beneficiary designations on retirement accounts and life insurance. These often reveal problems no portfolio adjustment can fix, like a 401(k) still listing an ex-spouse as beneficiary.
Ask What Legal Standard They Are Held To
This is the question most people ask badly. “Are you a fiduciary?” gets a yes-or-no answer without telling you what the yes or no actually means.
A registered investment adviser operates under Section 206 of the Investment Advisers Act of 1940, which imposes a fiduciary duty to act in your best interest at all times. That duty has two parts: a duty of care (competent advice) and a duty of loyalty (the adviser’s financial interests cannot come before yours). Conflicts of interest must be disclosed, and the adviser must genuinely try to avoid them.1U.S. Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers
Broker-dealers operate under Regulation Best Interest, which took effect in 2020. Reg BI requires brokers to act in a retail customer’s best interest when making a recommendation and to disclose conflicts, fees, and product limitations in writing.2U.S. Securities and Exchange Commission. Regulation Best Interest – The Broker-Dealer Standard of Conduct
The practical difference matters. A fiduciary duty is ongoing across the whole relationship. Reg BI applies at the moment a recommendation is made, and a broker under Reg BI has no continuing duty to monitor your account after the trade executes unless they agree to provide ongoing services.2U.S. Securities and Exchange Commission. Regulation Best Interest – The Broker-Dealer Standard of Conduct Some professionals are dually registered and wear both hats depending on the product being sold. Ask which standard applies to your relationship, and ask them to confirm it in writing. An advisor who dodges the question is telling you something.
Ask How They Get Paid
Compensation shapes advice. If you don’t understand how the advisor earns money, you can’t evaluate whether their recommendations serve you or serve their revenue.
Fee-Only vs. Fee-Based
A fee-only advisor earns money exclusively from what you pay them. No commissions, no product kickbacks. A fee-based advisor collects your fees and may also earn commissions from selling insurance products, annuities, or certain mutual fund share classes. That commission eligibility creates an incentive to recommend one product over another regardless of cost or fit.
Common Fee Arrangements
The most widespread model is an assets-under-management fee, typically around 1% annually, with larger portfolios often paying 0.75% or less. Hourly rates for planners run roughly $150 to $500 depending on experience and complexity. Some advisors charge a flat fee for a one-time plan. Commissions apply mainly to annuities, life insurance, and certain mutual funds; those costs are baked into the product and don’t appear on a separate invoice, which makes them easy to miss.
Get the Full Cost in Writing
Request the advisor’s Form ADV Part 2A, also called the firm brochure. Federal rules require this document to describe how the firm earns revenue, what fees and expenses you will pay, and whether the firm or its employees receive compensation from third parties for recommending certain products.3U.S. Securities and Exchange Commission. Form ADV Part 2 Look for revenue-sharing payments from custodians, clearing brokers, or mutual fund companies. The SEC has stated that disclosing an advisor “may” have a conflict from revenue-sharing when the conflict actually exists is not adequate disclosure.4U.S. Securities and Exchange Commission. Frequently Asked Questions Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Compensation
Beyond the advisory fee itself, ask about expense ratios inside recommended mutual funds or ETFs, transaction costs, and any platform or technology fees. These layered costs compound over decades.
Ask Where Your Money Will Be Held
This is one of the simplest and most important questions in the whole interview. The answer should be a qualified custodian, meaning a bank, FDIC-insured savings institution, or registered broker-dealer that holds your assets in an account under your name.5eCFR. 17 CFR 275.206(4)-2 – Custody of Funds or Securities of Clients by Investment Advisers Your advisor directs investment decisions; a separate institution physically holds the assets. That separation is the single most effective structural safeguard against an advisor stealing your money.
Under SEC rules, the qualified custodian must send account statements directly to you at least quarterly, showing every transaction and your current holdings.6U.S. Securities and Exchange Commission. Custody of Funds or Securities of Clients by Investment Advisers Receiving those statements from the custodian rather than from the advisor lets you independently verify your money is where it should be. Nearly every major advisory fraud case, including Madoff, involved an advisor who also served as custodian or fabricated custodial statements. If an advisor says they hold your assets directly or that statements will come only through their office, end the meeting.
Ask About Investment Approach, Authority, and Continuity
Once the structural questions are settled, dig into how the advisor actually runs money. Ask whether they favor passive index strategies, active stock selection, or a blend. There is no universally right answer, but the philosophy should fit your risk tolerance and time horizon. An advisor who runs concentrated stock portfolios for retirees living on their savings is a mismatch regardless of past returns.
Ask about their experience with clients in your income bracket and life stage. A professional who mostly serves business owners may not understand the tax nuances facing a physician with deferred compensation, and vice versa. Specific experience beats general credentials here.
Discretionary or Non-Discretionary
Ask whether the advisor wants discretionary authority over your accounts. With discretion, the advisor can buy and sell on your behalf without calling you first. Under a non-discretionary arrangement, the advisor recommends trades and you approve each one before it executes. Discretionary management is more common and more convenient, but it carries higher fiduciary responsibility for those decisions. Confirm which model the advisory contract grants before you sign.
Communication and Succession
Set expectations for how often you will hear from the advisor. Some firms send monthly performance reports; others schedule semi-annual or annual reviews. Knowing the cadence up front prevents frustration during volatile markets.
Ask what happens to your account if the advisor retires, becomes incapacitated, or leaves the firm. A good practice has a written succession plan identifying who takes over relationships and how the transition works. A solo practitioner with no plan is a risk your portfolio inherits.
Verify What They Tell You
Trusting an advisor based on a polished website or a friend’s referral is how people end up with professionals who have regulatory history they never mentioned. Two free databases let you check before you commit.
FINRA BrokerCheck
BrokerCheck covers anyone who is or was registered to sell securities. Search by name or Central Registration Depository (CRD) number to see employment history, securities licenses, and disclosure events including customer complaints, regulatory actions, arbitration awards, and criminal charges.7Financial Industry Regulatory Authority. BrokerCheck – Find a Broker, Investment or Financial Advisor The full report also lists every securities exam the individual has passed.8FINRA.org. BrokerCheck FAQ BrokerCheck retains information on people who have left the industry, so a prior registration that ended with a disciplinary action still shows up.
SEC Investment Adviser Public Disclosure
For registered investment advisers, use adviserinfo.sec.gov. The site gives you Form ADV filings detailing the firm’s business practices, fee structure, conflicts of interest, and any disciplinary history involving the firm or key personnel.9U.S. Securities and Exchange Commission. IAPD – Investment Adviser Public Disclosure You can also search individual adviser representatives.
Also request the Form ADV Part 2B brochure supplement for the specific person who will manage your account. It covers the individual’s education, professional certifications, and any disciplinary events in their personal history.10eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements Advisers must deliver this supplement before providing you advisory services and update it promptly when a new disciplinary event occurs.
CFP Board Verification
If the advisor claims the Certified Financial Planner designation, verify it directly through the CFP Board’s online tool. The search shows whether the person currently holds certification, whether they held it previously, and whether the CFP Board has publicly disciplined them or received a bankruptcy disclosure.11CFP Board. Verify a CFP Professional
State vs. Federal Registration
Not every advisor registers with the SEC. Firms managing at least $110 million in client assets register federally; smaller firms generally register with their state securities regulator.12U.S. Securities and Exchange Commission. Transition of Mid-Sized Investment Advisers From Federal to State Registration If BrokerCheck and IAPD come back blank, check your state securities regulator’s website for a separate lookup tool. An advisor who does not appear in any of these databases should not be managing your money.
Red Flags During the Interview
Some responses should end the conversation. An advisor who guarantees specific returns is either lying or doesn’t understand markets; no legitimate professional promises a guaranteed outcome on securities. An advisor who pressures you to sign at the first meeting is prioritizing their timeline over your due diligence.
Watch for vagueness on compensation. If “how do you get paid?” produces evasion, the fee structure likely includes commissions or revenue-sharing the advisor would rather not explain. The same goes for custody. An advisor who cannot immediately name the third-party custodian, or who suggests statements will come only through their office, is a structural problem.
Other signals: discouragement from checking regulatory history, recommendations to move your entire portfolio into proprietary products, no written succession plan. None is automatically disqualifying, but each deserves a clear explanation. Good advisors expect these questions and answer them without hesitation.
If You Are Switching From an Existing Advisor
Changing advisors does not by itself trigger a tax bill. The tax risk depends on how the assets move. An in-kind transfer moves your investments directly from the old custodian to the new one without selling anything, so no taxable event occurs. Liquidating to cash before transferring means realizing capital gains on any appreciated positions. Positions held less than a year face short-term rates, which match ordinary income and can be substantially higher than long-term rates.
Check for products with surrender charges. Annuities commonly carry surrender penalties starting around 7% in the early years and declining over six to eight years. If you are still within that window, switching could mean paying a steep exit fee even if the new advisor is clearly better. Account transfer fees from the outgoing brokerage are usually under $100, and many receiving firms will reimburse them.