Questions to Ask Your Financial Advisor/Stockbroker

At Sonn Law Group, our experienced securities fraud lawyers are committed to protecting investor rights. We want all investors to have the tools and knowledge that they need to make informed decisions. This includes knowing the right questions to ask a financial advisor or stockbroker.

With the appropriate questions in mind, you will be better able to select the financial representative that is best suited to handle your unique investment needs. Here, we have provided a list of seven important questions that you should ask your stockbroker or financial advisor.


  1. What Background Experience Do You Have?

Before selecting a financial advisor, you need to be sure that they are truly qualified to handle your investments. It is a good idea to ask for a brief history of a stockbroker’s prior work experience. In addition, you should ask about licenses, certifications, and other relevant credentials.

Most investors should look to work with a Registered Investment Adviser (RIA), as these financial professional owe a fiduciary duty to their clients. This means that RIAs have a legal obligation to always act in their customer’s best interests.


  1. How Are You Paid For Your Services?

All investors need to remember the following important fact: a financial advisor’s fees come directly out of the returns of investors. This is a chronically underlooked issue. When working with a broker, you need to know both the structure by which they get paid, along with the total amount that they are getting paid. Generally, advisors get paid in one of three ways:

Most investors should focus their attention on looking for a financial advisor or stockbroker who charges low fees and offers a clear payment structure. The higher the investments costs, and the more complex the payment structure, the more likely you are to run into trouble. Keep your fees low.


  1. Have You Ever Been Disciplined or Accused of Misconduct?

You certainly will want to avoid working with a broker who has a history of serious misconduct. You should ask your current or prospective advisor about their disciplinary history. If there are any past issues, those should require a comprehensive explanation.

If you are working with an RIA, you should also be sure to get their Central Registration Depository (CRD) number. You can use this number to reference a financial advisor’s history on FINRA’s BrokerCheck. This free tool allows investors to research important background information about advisors and brokerage firms. If your broker lies about or misrepresents past misconduct, you need to find a new financial advisor.


  1. How Will You Select the Investments for My Account?

Beyond general information about the background of the broker, you also need to be sure that they have the right investment strategy for your specific needs. You should inquire about how your broker plans to select investments for your account.

At this point, a qualified financial advisor should be able to clearly explain the overall investment strategy. Certainly, you need to work with a broker who will structure your portfolio in a manner that is suitable for your goals. Though, suitability is merely a basic requirement.

A qualified financial advisor should craft a strategy that is truly the best fit for your individual needs. Be prepared to ask follow up questions so that you can be sure that the financial advisors actually understand your background and your investment objectives.


  1. What Risks are Associated With This Investment Strategy?

In investing, there is no such thing as a ‘guaranteed’ winner. Every financial product and investment strategy will come with certain risks. As an investor, you need to understand the full extent of your risk. You should always ask your broker about level of risk that comes with a financial product or investment strategy. If you follow their proposed investment strategy, what is the worst case scenario? How likely is that scenario to occur? You may not want to take on as much risk as your stockbroker is proposing.

If your broker is trying to downplay risk of the strategy, or they are trying to make promises that strike you as unrealistic, you should take that as a major red flag. A qualified financial advisor will always give you a sober and honest assessment of the risk. You want real information, not false promises. If a broker is promising you high returns and low risk, there is very good chance that they are making promises that they will not be able to deliver on.


  1. WIll You Work Alone or With an Investment Team?

You should also ask about how many people will have input regarding your investments. Specifically, you want to know if your broker will be working alone, with some support staff, or as part of a larger investment team. That is not to say that one option is inherently better than the other, but instead to ensure that you actually know how your investments will be selected and controlled. This type of question can reveal important information regarding just how the broker/brokerage firm manages portfolios.


  1. How Much Contact Do You Have with Your Clients?

Finally, it is important to ask about correspondence and your ability to have ongoing conversations with your financial advisor. What happens if you call up your financial advisor on a Monday morning? How long will it take until you can have an extended conversation with them? It is important that you ensure that you work with a financial advisor who is the right fit for your investment needs and your personality. You want someone who will pick up the phone when you have questions or concerns.


Contact Our Investment Fraud Attorneys Today

At Sonn Law Group, our law firm is a leader in the field of investment loss recovery. If you or a family member lost money because of the negligence or misconduct of your stockbroker or financial advisor, we can help. To request a free, no obligation review of your case, please reach out to our legal team today.


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