By: Alex Bridges, CFP®, EA, ChFC®, RICP®
If you’re five to ten years from retirement, choosing a financial advisor is one of the more consequential hires you’ll make. The advisor you pick will likely help shape decisions about when to retire, how to draw income, when to claim Social Security, and how to manage taxes for decades.
Most people spend more time researching a new car than interviewing an advisor. This guide lists 15 questions I think every pre-retiree in The Woodlands, Spring, Conroe, and the Greater Houston area should ask. It also covers what a good answer tends to look like and where to verify what you’re told.
Full disclosure: I’m a fee-only financial advisor, so I have a point of view. Every question below is one I’d expect you to ask me, too.
Why do these questions matter more as you approach retirement?
In your working years, mistakes can often be absorbed by future savings. Close to retirement, the margin for error shrinks. A poorly timed withdrawal strategy, an unnecessary product, or a missed tax opportunity can be harder to recover from once paychecks stop.
The questions below fall into four groups: how the advisor is obligated to act, how they’re paid, what their record shows, and how they’d actually help with the retirement decisions in front of you.
Is the advisor legally required to act in your best interest?
1. Are you a fiduciary at all times, on every account, and will you put that in writing?
This is the foundational question. Registered investment advisers owe clients a fiduciary duty under the Investment Advisers Act of 1940, as described in the SEC’s 2019 interpretation of the investment adviser standard of conduct. That duty includes both a duty of care and a duty of loyalty.
The words “at all times” matter. Some professionals are dually registered and can act as an investment adviser on one account and as a broker on another. Brokers are generally held to the SEC’s Regulation Best Interest, which is a different standard. A clear, written answer helps you know which standard applies to every recommendation.
If the advisor is a CFP® professional, the CFP Board’s Code of Ethics and Standards of Conduct also requires them to act as a fiduciary when providing financial advice to a client.
2. Are you registered as an investment adviser, a broker, or both?
Registration tells you which rules the advisor operates under and where to look them up. Investment advisers register with the SEC or a state securities regulator. Brokers register through FINRA.
Neither answer is automatically good or bad. What matters is that you understand the role the person is playing when they make a recommendation to you.
How, and how much, will you actually pay?
3. How are you paid — including anything you receive from third parties?
Ask the advisor to list every way they or their firm are compensated in connection with your relationship. That includes advisory fees, commissions, insurance or annuity compensation, revenue sharing, and referral payments.
A “fee-only” advisor is paid only by clients, not by product providers. A “fee-based” advisor may charge fees and also earn commissions. The terms sound alike, which is why it helps to ask directly.
Every compensation model has some conflict. An advisor paid a percentage of assets may have an incentive to discourage you from paying off a mortgage. An advisor paid a flat fee has different incentives. A good advisor will name their own conflicts without being prompted.
4. What will I pay in total, in dollars, in the first year and each year after?
Percentages can obscure real costs. Ask for a dollar estimate that includes the advisory fee plus the internal expenses of any funds recommended.
If the advisor charges a percentage of assets, ask how the fee changes as your portfolio grows. For many pre-retirees with sizable 401(k) and IRA balances, it’s worth seeing the dollar figure written out.
5. Can I see your Form ADV Part 2A, Part 2B, and Form CRS?
Registered investment advisers are required to provide clients with a disclosure brochure, Form ADV Part 2A. It describes services, fees, conflicts of interest, and disciplinary history. Form ADV Part 2B, the brochure supplement, covers the individual advisers who will work with you.
Firms serving retail investors must also provide Form CRS (Client Relationship Summary), a short plain-English summary of services, fees, and conflicts. Reading the fees and conflicts sections before your first meeting can make your questions much sharper.
What does the advisor’s record show?
6. Have you or your firm ever had a disciplinary action or customer complaint?
Don’t rely on the answer alone. You can look up any registered investment adviser representative on the SEC’s Investment Adviser Public Disclosure (IAPD) website. You can also check brokers on FINRA’s BrokerCheck.
If something appears, ask about it. Context matters, and how an advisor explains a past issue can tell you a lot.
7. What credentials do you hold, and what did they require?
Financial designations range from rigorous to nearly meaningless. The CFP® certification requires education, a comprehensive exam, experience, and ongoing ethics requirements. You can confirm a professional’s status with the CFP Board’s verification tool.
For tax-heavy retirement planning, ask whether the advisor is credentialed to give tax advice. Enrolled Agents, for example, are federally authorized by the IRS to represent taxpayers and are subject to Treasury Department Circular 230.
8. Who actually holds my money?
Most advisory firms use an independent, third-party custodian to hold client assets. You should receive statements directly from that custodian, not only from the advisor.
Custody practices for advisers are governed by the SEC’s Custody Rule under the Investment Advisers Act. Independent custodian statements give you a way to check what the advisor reports against what’s actually in your account.
How would the advisor help with your retirement decisions?
9. What does your planning include — and what doesn’t it?
“Financial planning” can mean a one-time report or an ongoing relationship covering investments, taxes, insurance, estate coordination, and retirement income. Ask for specifics.
For pre-retirees, it’s reasonable to expect help with retirement timing, Social Security claiming, pension or lump-sum elections, Medicare, and healthcare costs before 65. Ask what happens if you need help outside that scope.
10. How do you coordinate tax planning with my investment plan?
The years between retirement and required minimum distributions can present tax planning opportunities, depending on your circumstances. Examples include Roth conversions, managing which accounts you draw from first, and planning ahead for RMDs under the rules in IRS Publication 590-B.
Ask whether the advisor reviews your actual tax return and whether they coordinate with, or provide, tax preparation. An investment plan built without looking at your tax picture may miss things.
11. How would you build a retirement income plan for me?
Accumulating savings and turning them into a paycheck are different problems. Ask how the advisor decides which accounts to draw from, how much to withdraw, and how often the plan is revisited.
A thoughtful answer usually addresses Social Security timing, taxes, and inflation together, rather than a single rule of thumb.
12. What is your investment approach, and what would you do in a bad market the year before I retire?
Market declines right before or early in retirement can have an outsized effect on a portfolio. This is often called sequence-of-returns risk. Ask how the advisor’s approach accounts for it.
You’re not looking for a promise that losses won’t happen — no one can make that promise. You’re looking for a clear, repeatable process you understand and can stick with.
13. Do you sell insurance or annuities, or earn anything if I buy one?
Annuities and permanent life insurance can be appropriate in some situations. They can also carry significant commissions and surrender charges. If the advisor recommends one, ask how they’re compensated on it and what alternatives they considered.
An advisor who doesn’t sell insurance products can still review policies you already own, or ones another agent is proposing.
What will the working relationship look like?
14. Who will I work with day-to-day, and what happens if you’re unavailable?
At some firms, the person you meet in the sales meeting isn’t the person you’ll work with. Ask who handles your planning, who answers your calls, and whether that person holds the credentials you care about.
Also ask about continuity. A reasonable advisor should be able to describe their plan if they become ill, retire, or leave the firm.
15. How often will we meet, and how do I end the relationship if it isn’t working?
Ask how often reviews happen and what triggers an extra conversation. Retirement transitions, a death in the family, or selling a business usually warrant more contact.
Also ask about termination terms. Your advisory agreement should explain how either side can end the relationship and how any prepaid fees are handled.
How should you use the answers?
Interview at least two or three advisors and ask each the same questions. Take notes. Then verify what you can — Form ADV, IAPD, BrokerCheck, and the CFP Board’s site are all free.
Pay attention to clarity as much as content. An advisor who answers compensation questions directly, in dollars, and in writing is making it easier for you to make an informed decision.
How does Tiverton Wealth answer these questions?
Tiverton Wealth, LLC is a fee-only Registered Investment Advisor based in The Woodlands, TX, working with retirees and pre-retirees across the Greater Houston area. We don’t earn commissions and don’t sell financial products. We charge a flat advisory fee rather than a percentage of your assets, which is explained on our How We Get Paid page.
Tax planning and annual return preparation are coordinated through our affiliated firm, Tiverton Tax, LLC, under a separate tax engagement. You can read about how we work on our Our Process page and review my credentials on Our Designations.
If you’re interviewing advisors, I’m glad to be one of them. Bring this list. You can schedule an introductory fiduciary consultation to see whether our approach may be a fit for your situation.
You can review my full regulatory background on the SEC’s Investment Adviser Public Disclosure website: Alex Bridges — IAPD record.
This article is provided by Tiverton Wealth, LLC for general educational and informational purposes only. It does not constitute personalized investment, tax, or legal advice, and should not be relied upon as a substitute for advice from a qualified professional familiar with your specific circumstances. Tiverton Wealth, LLC is a fee-only Registered Investment Advisor providing services only in jurisdictions where it is properly registered or exempt from registration. Investing involves risk, including the possible loss of principal, and no strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results. Please consult with a qualified financial, tax, or legal professional before making decisions based on this content.
Frequently Asked Questions
What is the most important question to ask a financial advisor?
For many people, it’s whether the advisor is a fiduciary at all times on every account, and whether they’ll confirm that in writing. That answer shapes how every other recommendation should be viewed.
How can I check a financial advisor’s background?
You can search investment adviser representatives on the SEC’s Investment Adviser Public Disclosure website and brokers on FINRA BrokerCheck. CFP® professionals can be verified through the CFP Board. A firm’s Form ADV and Form CRS also describe fees, conflicts, and disciplinary history.
What is the difference between a fee-only and a fee-based financial advisor?
A fee-only advisor is compensated only by clients. A fee-based advisor may charge client fees and also receive commissions from selling financial products. Asking an advisor to list every source of compensation is the most reliable way to tell the difference.
How many financial advisors should I interview before hiring one?
Interviewing two or three advisors and asking each the same questions can make it easier to compare fees, services, and communication style. Verifying their answers through public disclosure records is also a useful step.
When should I hire a financial advisor before retirement?
Many people find it helpful to start working with an advisor five to ten years before retirement. That window can leave time to plan retirement timing, Social Security, tax strategy, and income sources, depending on your circumstances.