10 Must-Ask Questions for Your Financial Advisor
Handling finances and growing financially is so hard, especially if you are not educated in the field. A financial advisor is one of the best investments you can make, but you need to be selective and make the right choice since they may prove expensive. What better way to know who to work with than asking the right questions? Below you will find ten of the best questions to ask a financial advisor so that you know you’re talking to the right person.
1. Qualifications
The first thing to get interested in is the financial advisor’s degree, education, and overall qualifications. Instead of getting recommendations from friends who loved their advisor because he was witty, get ready to do your research.
Terms such as “financial advisor” or “financial planner” are so commonly used that it is so easy to end up collaborating with the wrong person. Start by asking them about their education, do they have an excellent understanding of finances, investment, retirement, and more.
Next up is certification. Learn if they have any certificates that prove they are qualified to do what they’re doing. Finally, talk about their experience. This is probably the most essential part. If they have long-term experience giving financial advice to numerous clients, you are on a good path.
2. What Is the Total Cost
Instead of asking a financial advisor about fees, you should ask about the total cost. Various advisors use different ways of payment, and, the total cost can vary a lot from the fee, so make sure you know everything there is about the payment before you agree on anything. Some of the fee types include:
- Fee-for-service: fixed fee, hourly fee, one-time fee, and more.
- Transaction fees: these fees are charged by the custodian when your advisor sells or buys investments.
- Management’s fee: another fee that might be mentioned is the fee that the advisor will earn from managing your assets.
Once the advisor has explained all the expenses, let them know that you want to get an estimate of the total cost. Do not forget to ask for a written document where the advisor will disclose all their fees and the type of payment you agreed upon. Once you have everything on paper, there will be no hidden charges.
3. How Long Have They Been Doing This?
Try to find out about their background with employers and how many years the advisor has been working with clients. Some advisors will say that they have been with the same company for a long time, while others will list many on their resumes.
Not giving a chance to beginners feels cruel, but it’s safer to stick to someone who has numerous happy clients and years of experience.
It is good to have someone who has been at the same place because you will know they are faithful and a good asset to the company. A person who has been shifting jobs often does not give an impression of a stable employee, so it might not be the best idea. You want someone who is serious, dedicated, and does not run from company to company.
4. Clients
Happy clients are the best testimonial you can get. You should ask around not only about the number of previous clients but also the type. It is great if the advisor has experience with clients who had similar expectations as you. Some focus on investments; others are trying to buy their first home. You fit into a particular group, so be more precise about what you want and find out about the advisor’s experience with similar cases.
Get testimonials from previous clients if you can. A good advisor should not struggle to say more about their typical clientele and provide reviews from happy customers.
5. How Often Will You See Each other?
One of the questions to ask your financial advisor should be about their availability and how you will be in touch. Find out whether they are planning on scheduling regular meetings, or they prefer getting in touch via email, phone. Ask whether you should be the one to check-in for updates or whether they will schedule regular calls.
It’s normal for an advisor to be more present initially, but they shouldn’t completely disappear after a while. If you have a clear idea in your mind about the communication that you expect, let them know. It’s better to be open about all your expectations so that you don’t end up being disappointed.
6. Services
There are specific financial advisor requirements that you need to stick to. One of those is that the services they provide fit your needs. Some advisors specialize in certain areas, such as insurance or stocks. So, if that’s not something you’re interested in, you should opt for an advisor who can help you in a range of financial matters.
7. Investment Style
Although investing is not the only part of finance, it is good to know if you and the person you want to hire have similar views. Talk about their investment style. Do they prefer to invest often and sell as well, or are they more interested in stable opportunities that will bring more secure growth?
If you’re not experienced in investment, get them to give you the basics so that you can do more research and figure out which way you want to go. For example, if you are interested in hedge funds, you can try investing in one.
8. What to Expect
There is no safe way for someone to predict the future. However, it is logical to ask financial advisors what their expectations and predictions are. Let them give you a long-term picture of what might happen in the future. Yes, stocks are so unpredictable, but having an estimate of when you will get your returns sounds comforting and secure.
9. Financial Planning
So many people are interested in financial planning and want to see the whole picture. If that is also something that you want, let them know. Since some planners specialize in specific fields, they might not want to get interested and involved with others. Financial planning includes thinking of your entire financial future, including taxes, retirement, estates, risk management and much more.
If you want only to invest in stocks and buy a house, find a person who does that. But, if you are going to plan your whole future and are looking for long-term results, find a person who will focus on your financial plan in total. They should not be able only to create a plan; they should also help you execute it and guide you through it.
10. Minimum
Some companies and advisors have a minimum investment that you should make. This will give you an idea about the type of clients that the advisor usually has. If the numbers are too high and you do not think that’s right for you, you should find another person to talk to. Usually, if the investment minimum is high, so are the fees of the advisor. Thankfully, there are always more affordable alternatives. These days you can even talk to a financial advisor online.
FAQs
What is the difference between a financial advisor and a financial planner?
Many people are under the impression that the terms financial advisor and financial planner are the same. That is not entirely true.
The job description of a financial advisor says that it is a person who will help you with your finances in any form or way. They can work in banks, credit unions, insurance companies, independent financial planning companies, brokerage firms, and more.
On the other hand, a planner is supposed to help you get to a particular long-term goal regarding finances. They usually work on improving your overall finances, including taxes, retirement, and more. However, some planers focus only on specific expertise.
When should I get a financial advisor?
Hiring a financial advisor is always beneficial. Although there is not a correct answer to this question, it’s safe to say that you should hire one the second that you can afford it. If you have saved enough to feel safe for at least half a year, and the new hire will not damage your budget, you should consider talking to an advisor.
Everyone needs help with their finances. Although hiring an advisor can be quite costly, the benefits will eventually pay off the initial investment.
Final Thoughts
Finding the right advisor means asking all the right questions and being invested in your search. If you were wondering which questions to ask a financial advisor, this guide should make your job much easier. Although you should attend the interview with a clear vision, the person you meet should make you feel even more confident about your choice. If you have any doubts, do not hesitate to ask over and over again until you get all the answers that you need.