Seven Interview Questions to Determine Qualified Investment Advisors


Authored by Yudi Yuviama in Investments
Published on 11-24-2008

What exactly qualifies your advisor as a professional? Some advisors hang a shingle outside their doors and go to work. The following questions will help you to separate the wheat from the chaff.

1. Who are you registered with? The advisor should be registered with at least one of the following:

  • The Securities and Exchange Commission (SEC), 202-942-7040.
  • Your state securities department (usually found in your state capitol).
  • The National Association of Securities Dealers (if the advisor is commission based), 800-289-9999. If she is a CFP, the Certified Financial Planning Board of Standards, 303-220-1200. If not, you should avoid doing business with the advisor. You might want to check their registration status and ask whether there have been any complaints filed against them. Start with your state securities department, and then call the other agencies.

2. Where did you graduate from college? This might not be important to you, but it will sure answer the real question, which is, did you go to college and did you graduate? If you doubt the answer you get, call the college and check. You shouldn’t base your entire decision on whether the advisor finished college, but finishing college is a test of tenacity. If the advisor you’re interviewing didn’t finish college, make sure he can show you at least five good years of investment experience.

3. How long have you been in the investment business? Don’t be a guinea pig. If this is the advisor’s first few years in the business, you might want to wait. Most advisors make their biggest mistakes during the first year in the business. If you do hire a neophyte advisor, start with a small amount of money. The best advisor is someone who has experienced at least one big market correction (a period where many securities crashed, or went down in value) such as in 2001.

4. Who was your previous employer? You might even ask for a resume. If your advisor has jumped around from firm to firm, you might want to reconsider. If you were hiring an employee, would you hire someone who has jumped between jobs each year over the last several years? There are certainly exceptions to this rule. Ask why the advisor jumped around. He or she might have done it by design to learn more about the business before starting an investment firm.

5. What certifications do you have? The most important certification a money manager can possess is a CFA (chartered financial analyst). This is a comprehensive three-year course developed and maintained by the Institute of Chartered Financial Analysts. It is not the most important thing to look for when hiring an advisor, but it is impressive. Comparing the CFA designation to the CFP is like comparing college to high school. The CFA is much more difficult and comprehensive than the CFP. The only possible problem with the CFA is that it can make your advisor too academic. Academic investors can sometimes be rigid in their investment strategies, meaning they focus on certain kinds of conventional portfolio strategies but disregard others that also may be beneficial. Therefore, the most intelligent are not always the best money managers.

6. How many clients do you have? The advisor can have too few or too many clients. Too few may imply that he has little experience. Too many may mean that he can’t service all of them effectively. There is no magic number, and you’ll have to judge for yourself. The more clients the advisor has, the more experience he has. If you are hiring a money manager, you also may want to ask how much money she has under management. If the manager has more than $30 million under management, she’s built a significant business.

7. Questions to ask yourself. Are you impressed with this person? Are you comfortable with his credentials? Does he have enough experience to make you comfortable?


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