Regardless of your assets or income level, a financial advisor can help you assess your financial needs, make insurance decisions, and plan financial goals. With a good advisor, you may work together for many years to make wise investments and improve your financial future. Preparing yourself with the right questions can help you get the most out of your meeting with your financial advisor. Here are 5 questions you should definitely ask to make sure you have chosen the right advisor to become a partner in your success.
Are You a Fiduciary?
A fiduciary must work in their client’s best interests and place the client’s interests above their own. This means a fiduciary cannot recommend investments or products for which the advisor receives a commission if it isn’t the best choice for you. A non-fiduciary advisor does not need to meet this high standard. If your advisor isn’t a fiduciary, they may recommend proprietary funds that earn them a high commission without even telling you how they are profiting.
What Types of Services Do You Offer?
You should have a good understanding of what you will receive in exchange for the management fee you pay. Depending on the financial advisor, you may receive automatic rebalancing of your portfolio, customized stock and bond portfolios, specific recommendations for your investments, and other portfolio management services.
Many financial advisors today also offer insurance services to help you choose the best policies and save money, tax planning, estate planning, and risk management to hold onto your money and guard against lawsuits. Depending on your needs, you may want an investor who offers a one-stop shop for all of your financial planning rather than focusing solely on investments.
What Are Your Fees and How Are They Charged?
It’s always important to understand which fees you should expect upfront. A professional advisor will be transparent about their fees. Ideally, you want management fees of 0.5% or less if you have a digital advisor and no more than 1% if you meet with your advisor in person.
Make sure you ask if the advisor is paid the same regardless of the investments they recommend as advisors may earn a commission on some products in addition to their management fee. Always be suspicious of a financial advisor who advertises that they do not charge anything for their services. You can be sure the advisor is getting paid somehow. This is likely because they have put you in a fund their firm manages or they are directing trades to a specific company.
How Easy Will it be for me to Access Information?
If this is your first meeting with your advisor, ask how you will be updated on your investments. For an advisor you are already working with, call and ask for a briefing on your top holdings and your earnings reports. Your advisor should be able to get this information quickly. A good advisor will also be proactive in explaining the objective of each holding.
What Types of Clients Do You Work With?
Find out more about the financial advisor’s ideal client, how many clients they accept each year, and any specialties they may have. This will help you choose an investor who is a good fit for your needs. It’s common for advisors to have a niche such as post-divorce finances or soon-to-be retirees.