Investors who are looking for an advisor have additional questions to ask, including:
1. How much do you charge, and what is it based on?
An advisor who is paid a fee and does not receive commissions on certain products is less likely to have conflicts of interest.
2. What, if any, other products do you sell besides investment advice?
Financial advisors can sell other products, like insurance. That can be fine, but make sure you understand how they are compensated for everything and any potential conflicts of interest that can ensue.
3. When you make recommendations, will they be in my absolute best interest or will they be one of many suitable alternatives?
A year from now, all advisors will be required to make recommendations based on a client's best interest, and must disclose any conflicts of interest. But for now, it is a good idea to know what is driving an advisor's choices.
4. Please provide me with a written estimate of my total investment costs with you in my first year, and explain how they are calculated. Please also estimate for me what your firm will likely earn if I become a client.
This question, suggested by Blackman, offers another way to find out what is driving an investor's recommendations.
Another good idea is to look at BrokerCheck, operated by the Financial Industry Regulatory Authority, to make sure the advisor has not been the subject of any regulatory or criminal sanctions. Even your longtime advisor can run afoul of the rules and it is a good idea to be watchful, experts say.