10 Questions to Ask Your Advisor

| March 16, 2015
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Your Investment Advisor

Picture the discussion.  You are a financial advisor.  You get a call from a client.  He just attended a competitor’s dinner presentation extolling the virtues of a specific financial product.

  • Your caller is a cautious man, aware that his dinner host is in business to profit and the fellow may not be trustworthy. His natural skepticism tempered his enthusiasm.  The dinner pitch made the investment sound almost too good to be true.   This future retiree wanted a second opinion.  He decided to call you because he and his wife heard about you from a friend and you sounded trustworthy.  They were told you cared about people and you could help them understand the investment and make a wise choice that will be well suited for their needs.
  • A salesman’s dream call?  The prospect clearly likes the idea of buying the product. He acknowledges an appreciation for your expertise.  He might have heard about the product from someone else, but you know he will listen to your advice and wants to buy from you.
  • But wait.  What does the client expect from you?  Did he call you to make a purchase, or is he honestly seeking your advice with the expectation you will put his needs ahead of your own quest for profit?  Would you have the professional integrity to ask a few more questions to insure you offer the client the very best options available?

How about if the shoe were on the other foot and you were the prospective client (or a current client)?  What level of integrity do you expect to receive?  Is your current advisor exceeding your expectations, or simply telling you what you want to hear?  How do you know if the advice you receive can be trusted and is worth the expense?

Investors are jaded by a broken business model of investing characterized by commission driven self interest and wealth robbing fee structures.

Advisors rationalize their inappropriate behavior through a combination of ethical naiveté (if it isn’t illegal, it must not be wrong) and competitive rationalization (the prospect is going to buy it anyway, so they might as well buy it from someone who cares – namely me).

The answer to the value question is not to simply reject all advice.  There are financial professionals who dedicate their lives to telling the truth, to enriching others and to helping investors achieve their financial dreams.  The key is to understand what to look for in an advisor, and how to know when you find one worth your time and your trust.

How can investors discern between good and bad advice? 
Bradley Steiman, Director and Vice President at Dimensional Fund Advisors, offers the following "10 Questions to Ask Your Advisor."  They are also wonderful questions to ask yourself to test your investing acumen:

  1. Was your investment education obtained on Wall Street, or are you familiar with the knowledge base of seven decades of evidence-based finance?
  2. In a free market where competition drives prices toward equilibrium, do you believe you have information or skill that gives you a competitive advantage over all other investors combined?
  3. Do you attempt to forecast anything? Do you claim to be able to pick stocks, identify winning money managers (in advance), or time markets? What evidence do you have to support these claims?
  4. Do you make promises that you cannot keep?
  5. Do you focus on returns, or the risk/return trade-off?
  6. Do you give advice and inform clients about appropriate investment solutions or do you sell and facilitate transactions of products the client wants?
  7. Do you maintain a disciplined investment experience and keep clients invested in a portfolio they need, or will you chase performance in pursuit of investment products the client wants?
  8. Will you let clients pay for your advice if they do not take it? In other words, if a client does not accept your recommendations, will you keep him as a client, and more specifically, accept compensation from product providers that the client wants to use?
  9. What is the total cost to the client? Who earns what and how is it charged? Do you have any incentive to give anything but your best advice?
  10. Are you skilled at dealing with the things you can control (structure, diversification, costs, taxes, etc.), or do you focus on what amounts to noise (e.g., short-term performance, the financial press, flavors of the month, etc.)?


Good advice in pursuit of Peaceful Wealth is defined by a sense of comfort grounded in the knowledge you are done worrying about your investments.  You know how markets work. You understand the value of risk and reward. You own a beautifully diversified, low cost, properly allocated portfolio.  Your investment focus is long term.

Discerning the value of each investment option you encounter will determine your outcome.  Charting the proper course is essential. Trusting your navigator to successfully guide your journey is imperative.  Straying off course by a single degree will alter your ultimate destination.

Your advisor’s answers to these 10 questions help make your choices clear.


This material is intended for educational purposes only and is not intended to serve as the basis for any investment or purchasing decisions.

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