Questions to Ask a Potential Money Adviser

In December 2011, the South China Morning Post performed a 'mystery shopper' exercise with financial advisers in Hong Kong to check on the quality of advice. I provided this list of questions for readers to evaluate potential advisers.

What are your qualifications?
Find out about their education, experience, and credentials. Keep in mind some credentials require significant time and effort (such as the Certified Financial Planner Designation), while some credentials can be earned on a Saturday afternoon. Figure out which type they hold, and confirm with the organization whether they are in good standing.

What is your typical client like?
Here we are trying to find out if they work with people in situations relatively similar to your own. Some planners focus exclusively on high-net-worth clients, and some focus on working with the middle class. If your needs are different from what they typically deal with, it may not be a good fit.

What services will you be providing?
While anyone can call himself a financial adviser, it should not be a surprise that there are many different ideas as to what constitutes a financial plan. Ask if you will receive a written financial plan, and what areas will be addressed.

What is your investment approach?
Some advisers believe in trying to beat the market, and some do not. Your adviser should be able to articulate his approach and explain why he has chosen a particular strategy. It is important for you to be able to understand his approach, as uncertainty will make it much more difficult to follow during turbulent times.

How are you paid?
Some advisers work for a fee, and some work for commissions paid by product providers. The issue with commissions is that product providers offer higher payments to advisers for recommending their more expensive products. This arrangement led to such widespread abuse that regulators in Britain and Australia decided to ban commissions for financial advisers. Find out how your adviser is paid and, if they work for commissions, find out how much they stand to receive if you follow their advice.

-Tony Noto
As published Dec 12, 2011 in the South China Morning Post