Are you looking for a financial advisor to help manage your finances? It’s important to ask the right questions to make sure you find the best fit. These questions will give you a better understanding of your potential advisor’s services, fees, and investment approach.
Do you have a financial advisor? Or are you currently interviewing a few to work with? I want to provide a couple of questions for you to ask financial advisors to make sure that your needs will be taken care of. As a certified financial advisor, I know some financial advisors will withhold information that you’re entitled to know, but you may not have thought to ask for it.
Asking these 7 questions will give you a clear understanding of what a financial advisor can offer, how they operate, and what fees are involved:
There are typically Fee-Based Advisors that charge a percentage of your assets that they run and financial advisors that charge by the hour regardless of your assets. Be sure to ask about their financial advisory fees, any fees that are inside their funds that they choose to use for you, trading fees, management fees, etc.
You need to find out about all the fees that are involved because sometimes the fund managers charge fees. Financial advisors usually leave this information out when they shouldn’t.
This question goes together with the first question, but it’s important to know whether you’re getting value for the fees that you’re paying.
Sometimes, financial advisors will recommend an “A-share” or “B-share,” which means you have to pay a certain percentage to even get into a fund. You want to avoid these shares. You don’t want to pay these because you have plenty of other options that are great and are without these fees. They’re called “front-end” and “back-end” loads.
If your financial advisor is suggesting anything with those kinds of fees, ask them for a good explanation of why. You can compare the performance of an index fund and the fund that they’re suggesting to see why it’s better to avoid unnecessary fees.
This question is mainly to help set up your expectations. Ask whether they’ll call you quarterly, annually, or maybe monthly. If they’re managing your money, make sure it’s a schedule that you’re comfortable with. You want to know that you’ll hear from them, so make sure they’re calling you when expected.
This is where you’ll get a lot of the value so it’s really important to see if they offer it. Some financial advisors only do portfolio management, which means they only manage your investments by diversifying or allocating your money appropriately.
But there are others that provide financial planning by assisting with running retirement calculations, making sure you don’t run out of money, and getting a good sense of what you can live on. If they offer financial planning, then they can look at all your different goals and help you even create those goals so you know how much to save and invest.
It’s common to see people start off by being way too conservative because they’re nervous. And that’s completely understandable because they’re new to investing and their financial advisors may not know how conservative or how aggressive you should be with your investments to reach your long-term goals.
If you don’t understand how to balance that for your investments, you might be missing out on a lot of money. Your investments need to be given a certain amount of opportunity to make room for growth. But if you’re close to retirement with aggressive investing and no income plan getting into retirement, then you might want to slow down and be conservative with your investments in case of the market drops unexpectedly.
In case the stock market drops, ask them if they’ll give you a call, let you know if there need to be any changes to the portfolio, or if there is anything that you need to do to protect yourself from this kind of event.
All financial advisors operate differently and that’s why it’s important to get clarity and find out how they and their firm works.
Did these questions help you out? If you have any additional questions to ask me, feel free to leave a comment down below!
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