Don’t forget lessons from business when selecting a financial advisor

Most business owners and executives have gone through some tough experiences when it comes to hiring key personnel. Lessons from those experiences should be applied in personal life, as well. The same care you’d apply in hiring a comptroller or CFO for your business should be given to selecting a wealth management professional.

That’s harder than it sounds. Your business has established patterns for interviewing and hiring that are designed to help identify needed talents. If a referral comes your way, you apply a disciplined process to ensuring the person — even if coming with strong recommendations — is a good fit for your business. You may have a list of questions you ask every potential senior hire.

On the personal side, however, it’s surprisingly easy to set aside all these patterns and lessons when selecting advisors — whose function, after all, is vitally important to your financial success even though they aren’t part of your corporate team.

It’s all too easy to simply take a referral from a friend or colleague and presume that a particular financial professional is a good fit for you because you respect your acquaintance and his or her judgment. Referrals are valuable, but they aren’t enough. Just as in the business setting, you need to do your homework and step through a methodological process to be confident in your selection.

Furthermore, people are all too likely in their personal lives to make unbusinesslike decisions simply based on whether they enjoy someone’s company. While it’s essential to have a good rapport with your personal advisory team — accountant, attorney, or wealth manager — that ease of interaction is obviously only one part of the puzzle. Just as in hiring a good employee, you want someone with a good attitude who will work hard on your behalf, be accurate, and respond in a timely fashion. More than anything, you want someone you can trust.

So how to proceed with a more businesslike approach? Ask questions — probing ones — just as you would in a business interview setting.

One of the best approaches is to formulate a list of key questions to ask each and every financial advisor you talk to. Below, I’ve laid out two key lines of inquiry and specific questions for each. In my mind, these are the crucial questions. (For even more potential questions, see an excellent recent Wall Street Journal article by financial columnist Jason Zweig.)

Questions about establishing trust

  1. Do you believe you can consistently beat the market? 

This is a vital question because it tests whether someone can be honest with you. No one can beat the market every year.

  1. Do you earn any commissions on products or trades? How about incentives or referral fees from any vendors?

Commissions on trades provide an incentive to trade — and incur costs. Commissions on product sales, along with incentives or referral fees, represent conflicts of interest. You need to understand how an advisor gets paid. You need to be sure all payments are aligned with your interests, not any other entity’s.

  1. Will you commit in writing that you are a fiduciary?   

A fiduciary must do what’s in your best interest. Get that commitment in writing.

  1. Have you ever made a mistake that affected a client? How did you handle it?

This is another question to help you gauge honesty. Everybody’s made a mistake. What matters to you isn’t what it was, or how big it was, but rather how the advisor handled it.

Questions about philosophy and discipline

  1. Do you have a disciplined approach that you can articulate? If so, what is it?

To be disciplined means to stick with a process through thick and thin. You want to know an advisor will hold to his or her disciplines and won’t chase returns. An advisor should be able to clearly explain the process applied to all aspects of investment selection, from risk assessment to portfolio allocation and rebalancing.

  1. How often do you trade?

A prior question dealt with trade frequency from the perspective of costs and commissions. This question addresses the same topic from a different angle. Long-term investors are generally best served by keeping trading to a minimum.

  1. Do you manage your own money, and if so, in what assets?

Be wary if an advisor doesn’t invest his or her own money according to the same disciplines proposed for your assets.

  1. What is your “all-in” weighted fee?

Investment services are typically offered with fees at several levels, including the advisors own fee and those of third-party managers such as mutual funds. You need to understand the “all in” fee on a proposed investment plan to make informed comparisons.


By bringing a businesslike approach to important selections on the personal side, you’re benefiting from lessons you’ve no doubt learned in business hiring. As in business, you can expect better results when you’ve been strategic about getting the best value and the best fit.

Jasper Vaccaro, J.D., is senior vice president and market leader for private client services at Wisconsin Bank & Trust.

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