We’re fans of DIY money management, but there are times in your life that it might make sense to hire a financial planner. If you do, Certified Financial Planner Jeff Rose suggests asking them one simple question: “How do you get paid?”
Of course, there are a number of questions you want to ask any potential planner or financial advisor. You’ll want to ask about their experience and what they have done for other clients. In a video for GOBankingRates, Rose says you should also ask how they earn their money, and look for a direct answer.
Financial advisors get paid in so many different ways. Some are commission-based, some are fee-based, some are fee-only, some are a combination of everything that I just mentioned. So to ask that specific question to that advisor, you better get a direct answer. If they don’t answer directly and most importantly, if their answer doesn’t make sense to you — do you want to hire somebody that you don’t understand how you’re paying for their services? I don’t think so.
NerdWallet has pointed this out before too. They say a solid advisor should be transparent in how they earn a living, and if they’re not, that may be a red flag. NerdWallet details how advisor fees work, and Rose explains more in his video at the link below.
The One Question You Should Ask Before Hiring a Financial Planner [GOBankingRates]