All advisors claim to be financial experts.  This is a frequently used marketing ploy that advisors use to win your trust and assets. But, how do you know who the real experts are?  The 10 questions on this page will help you determine the truth. And, don't be surprised if some advisors refuse to answer your questions. Some of them have a lot to hide.

This editorial lists the questions and the "right answers" so you know good answers from bad ones. We tell you the questions then we provide the “Right Answers”. Wrong answers increase your exposure to the risks and consequences of bad financial advice. We also provide “Notes” for each answer that explain why this information is important and why it should impact your decision to select or retain particular advisors.

It is critically important that you "require" all advisor responses in writing.  Verbal information is easy to misrepresent and even easier to deny later when it's your word against the advisors.

Q1: Are you a Registered Investment Advisor (RIA) or an Investment Advisor Representative (IAR)?

Right Answer: Yes. This is a critical question. If the advisor says no, you should disqualify him or her. The best advisors are RIAs or IARs.

Notes: Most RIAs and IARs provide wealth management services for fees. Other types of advisors, who are not RIAs or IARs, sell investment and insurance products for commissions. You don't want sales representatives influencing or controlling your financial decisions.

Q2: Do you acknowledge you are a fiduciary when you provide financial services?

Right Answer: Yes. This is also a critical question. If the advisor says no, you should automatically disqualify him or her from your selection process. The best advisors are acknowledged fiduciaries.

Notes:  Fiduciaries are held to higher ethical standards than non-fiduciaries. There is a high probability non-fiduciaries are sales representatives who market investment and insurance products for commissions.

Q3: Are you willing to provide full written disclosure for your credentials, ethics, business practices, and wealth management services?

Right Answer: Yes. You should always require financial professionals to "prove" they are the trustworthy, financial experts they say they are. Proof makes your selection or retention decision safer and easier.

Notes: There should be no exceptions to your requirement for proof. In the absence of documented expertise, your risk of bad advice increases dramatically.

Q4: How many years of financial experience do you have?

Right Answer: Minimum financial experience of five years experience or longer. You should require more years of experience for larger asset amounts.

Notes: Experience is the primary way advisors obtain the knowledge they need to provide competent planning and investment advice. It takes a minimum of five years for advisors to achieve a basic level of competence. Let less experienced advisors go through learning curves with other peoples’ money and financial futures.

QQ: What is your educational background?

Right Answer: A BA or BS degree and an advanced degree is even better.

Notes: Advisor degrees may not be related to financial services, but college shows a commitment to education that increases knowledge. Use the Internet to make sure the advisor’s degree is from an accredited school. Low quality advisors have been known to buy degrees from diploma mills to make them look better educated than they really are.

Q6: Do you hold any professional certifications or designations?

Right Answer: Yes. CFA ®, CFP ®, CIMA ®, AIF ®, and CPA/PFS are some of the best certifications.

Notes: Certifications are an important way for advisors to obtain the specialized knowledge they need to help you achieve your financial goals. Most certification programs also have continuing education requirements that increase advisor knowledge over time.

Q7: Do you have any disclosures on your NASD or insurance compliance records?

Right Answer: None. Any type of disclosure should be reason to disqualify advisors from your selection process. You should limit your selection to professionals who have clean compliance records.

Notes: Be sure to ask for advisors’ CRD numbers then check their compliance records by going to www.nasd.org and your state’s Securities Commissioner. Also, ask for the advisors’ insurance license numbers then check their compliance records by contacting your state’s insurance commissioner. You can't be too careful because you only have one financial future.

Q8: Do you have any disclosures on your criminal record?

Right Answer: None. Any type of disclosure should be grounds for disqualifying advisors. You should limit your selection to professionals who have clean criminal records.

Notes: Believe it or not advisors with criminal convictions can obtain securities licenses as long as their crimes weren’t securities related. It pays to ask the question and obtain a written response.

Q9: How are you compensated for your services?

Right Answer: A fee. The wrong answer is commissions. You should not select advisors who are paid commissions by product companies unless you have no alternative. If you have to select a commission advisor, the other nine questions still apply.

Notes: Compensation is the source of several potential conflicts of interest. That’s because third parties pay commissions to advisors who sell their products. Commissions are paid for sales and not for helping you achieve your goals. You can avoid the conflicts by paying advisors a fee for their services – the same way you pay other professionals (CPAs, attorneys) for their knowledge.

Q10: Are you willing to provide full disclosure in writing for any potential conflicts of interest that may impact the performance, risk exposure, or expenses of my assets?

Right Answer: Yes. If advisors try to talk you out of your requirement for full disclosure, automatically disqualify them from your selection process.

Notes: There are several types of potential conflicts of interest, for example advisors putting their financial interests ahead of yours so they can make more money, the sale of proprietary products that restrict your choices, the total expenses charged to your assets, the sale of annuities inside IRAs to maximize advisor compensation, and commission payments that are hidden from you.