Having a trusted financial advisor can be a key component to reaching your long-term financial goals. There are many different types of advisors available to you. You must understand what you need from your advisor before selecting the right candidate. During the interview process, you should ask many questions to understand what each advisor offers and decide if they meet your needs. To assist you in selecting, we’ve listed 20 questions to ask your financial advisor.
To ensure you make the most informed decision, revisit the 20 questions to ask your financial advisor as you evaluate your options. This detailed guide is designed to give you a deeper understanding of each advisor’s qualifications and how they align with your financial aspirations and requirements.
What Type of Firm Are You With?
You must understand the nature of the financial firm you are considering. Are they a large corporate firm or an independent advisor? Each type has its own advantages and limitations. Does a smaller independent advisor provide the resources that are important to you? Will a larger corporate firm give you the relationship you value in your financial journey?
What Services Do You Offer?
Financial firms offer various services, including investment management, retirement planning, tax planning, estate planning, and more. Knowing the available services ensures they align with your specific needs and goals. Remember, your financial needs will likely evolve as you get nearer to retirement. While you may not need a particular service right now, you may need it in the future.
Are You a Fiduciary?
A fiduciary is legally obligated to act in your best interest. This means that your financial goals are their top priority when making decisions. Non-fiduciary advisors might recommend suitable products but not necessarily the best option for you. Fiduciaries are goal-driven, not commission-driven. This distinction is crucial for ensuring your advisor’s recommendations are aligned with your financial well-being.
What Are Your Credentials?
Verifying that an advisor has the proper credentials to act as your financial advisor is essential. Through the FINRA BrokerCheck website, you can confirm that an advisor is properly licensed to be an advisor. Some credentials, such as CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), and others, are not required to be a financial advisor. However, they can indicate a level of expertise and commitment to professional standards. Knowing your advisor’s qualifications can give you confidence in their ability to manage your finances effectively.
What Are Your Values?
Your financial advisor needs to be a trusted partner. Understanding the values and ethics of a firm or advisor helps ensure their approach aligns with your personal beliefs and values. If the standard isn’t set in the beginning, you may have misunderstandings with your advisor down the road that could negatively impact your financial position or relationship with your advisor.
How Are You Compensated?
Advisors can be compensated through fees, commissions, or a combination of both. Fee-only advisors typically charge a flat fee or a percentage of assets under management, which can reduce potential conflicts of interest compared to commission-based compensation. The fee structure that works best for you will depend on the services that you need. Before committing to any firm or advisor, you must understand the fee structure in detail. Excessive fees can impact your long-term financial success.
What Does Your Client Base Look Like?
This may seem like a strange question, but the answer will give you clarity on what type of advisor you’re interviewing. Knowing the typical client profile can help you determine if the advisor has experience with individuals in similar financial situations or with similar goals to yours. Most advisors are experts in a particular niche. For example, a woman may find working with a firm with mostly female clients advantageous.
How Will We Work Together?
This question addresses the logistics of your working relationship. What responsibilities will the advisor and the client have in the relationship? What does each party expect from the other? The expectations must be set upfront to ensure the relationship effectively achieves your financial goals. Understanding the process helps set expectations for communication and collaboration.
How Do My Financial Goals Apply?
To be successful in your financial journey, specific goals need to be in place and understood by everyone involved. If you don’t have financial goals already, your financial advisor can help you define those goals. It is essential to know how the advisor will incorporate your specific financial goals into their strategy. This ensures a personalized approach that aligns with your short-term and long-term objectives. If your goals change, what actions will your advisor take to adjust your financial plan?
What Is Your Investment Philosophy for Individuals Like Me?
Having a trusting relationship with your advisor means that you both understand the plan for your investments. An advisor’s investment philosophy includes their approach to risk management, asset allocation, time horizon, and investment selection. Understanding this philosophy helps you determine if it aligns with your risk tolerance and financial goals.
Where Will My Assets Be Held?
Knowing where your assets will be held ensures they are secure and protected. Is it a reputable financial institution whose credentials can be verified? If not, you may want to seek other opportunities. Keeping your assets protected is paramount. You can also seek clarity on the logistics of managing your investments through the custodian.
How Do You Track and Report My Investment Performance?
Regular tracking and transparent investment performance reporting are crucial for monitoring progress toward your financial goals. This includes understanding the frequency and format of performance reports. Will my investments be compared to a benchmark? Define how you and your advisor will track the progress of your investments.
Will I Be Able to View My Portfolio?
Convenient access to your portfolio information is essential for staying informed about your investments. This includes online platforms or apps that allow you to view your holdings, performance, and transactions at any time. The tools available will vary depending on your advisor’s firm and the custodian that holds your investments.
What Resources Will Be Available to Me?
In addition to platforms that allow you to view your investments, other resources may be available to help you throughout your financial journey. Advisors often provide educational resources, market insights, financial planning tools, and more. Expanding your knowledge and staying informed will keep you engaged throughout your financial journey and give you clarity with goal setting. Knowing what resources are available can help you make informed decisions and enhance your financial literacy.
How Often Will We Communicate?
Regular communication is vital for staying on top of your financial plan. Understanding the expected frequency and preferred methods of communication ensures that you are kept informed and can promptly address any concerns. Official account reviews with your advisor should be scheduled at regular intervals that align with your preferences. Most advisors will want to meet every three to six months. When you have questions about your assets, who should you call? Independent advisors may take your call directly, while larger firms may have a customer service line that will take your call. Set expectations with the advisor for how you would like to communicate.
Will We Meet in Person or Virtually?
Since the COVID-19 pandemic, virtual meetings have become more commonplace than ever. Virtual meetings offer convenience and flexibility, especially if you have a busy schedule or prefer remote interactions. If you prefer in-person meetings, you need to confirm that your advisor is willing to do so. This question ensures that your advisor can accommodate your preferred mode of communication.
Do You Partner with Other Businesses?
Most advisors are not experts in every area of finance, and that’s a good thing. To have an effective financial plan, you need experts to help you in each area of the process. You should find an advisor with strategic partnerships to maximize your success. Partnerships with other professionals (like tax advisors, estate planners, or legal experts) can provide comprehensive financial services. Understanding these partnerships can give you access to a broader range of expertise.
Will I Be Able to Access My Money When I Need It?
This question will be fundamental when creating your financial plan and setting expectations with potential advisors. Liquidity is crucial for meeting unexpected expenses or taking advantage of opportunities. Knowing the procedures and possible restrictions for accessing your funds ensures you can manage your finances effectively. Your advisor should understand your regular obligations and preferences requiring cash flow.
What Is the Legal Structure of Our Relationship?
Before committing to any advisor, you must understand the structure of the relationship. What are the conditions of the agreement with the advisory firm? Is there a time commitment within the contract? What does the process look like if you decide to end the relationship? If your advisor cannot manage your assets, who will take over? Don’t make a commitment before understanding the parameters of the agreement.
Why Should I Work with You?
This open-ended question allows the advisor to highlight their unique value proposition, including their experience, approach, client success stories, and personal commitment to helping you achieve your financial goals. This final question will help you understand who your advisor is as a person and ultimately help you decide if this is the person you want to partner with.
Key Takeaways
As we conclude our guide on the 20 questions to ask your financial advisor, remember that your relationship with your financial advisor is one of the most crucial professional partnerships in your lifetime. Careful consideration should be given when selecting an advisor. Your financial success is vitally important, so finding the right financial advisor should not be taken lightly. You should interview multiple candidates before making your selection. Ask many questions, including the 20 questions to ask your financial advisor shared in this guide, and make your expectations known to each advisor. The questions discussed above will give you a comprehensive overview of each advisor and assist you with making the right decision. If done correctly, you can find an advisor who will be a valuable partner throughout your financial journey and help you achieve the financial success you seek.
If you found the 20 questions to ask your financial advisor helpful, we invite you to contact us or explore our additional resources for more insights. Let us help you secure the perfect advisor to guide your financial journey. Contact Us or Visit Our Resources today.
