25 Essential questions to ask a financial advisor | Know your advisor

Are you meeting a financial advisor for the first time? Here, we cover everything from whether you need a financial advisor to questions to ask a financial advisor and more. Read on!

Questions to ask a financial advisor

A financial advisor guides or provides financial services to their clients based on the client’s income and financial goals. How do you find a good financial advisor? There are some questions to ask your financial advisor that should help you determine if they are trustworthy.  The advisor should treat you with respect, integrity, and competence. In this blog, we suggest some questions ask a financial advisor. 

Should I get a financial advisor?

We occasionally wonder – should I get a financial advisor or do I manage my investments. There are several benefits of having a financial advisor. They can help create a sound investment strategy and minimize your tax liability. They help to lower risk factors and prevent you from making emotional decisions. Where do financial advisors work? They typically work in offices, banks, and investment offices. Several financial advisors are self-employed.

Also read: How to become a successful small business consultant in 2021?

What does a financial advisor do?

You may wonder, what does a financial advisor do? Or What do personal financial advisors do? Financial advisors are professionals who advise their clients on their finances. They help individuals and companies reach their financial goals faster. They use their knowledge and experience to make detailed financial plans. These plans include investments, savings, budget, insurance, and tax strategies.

When to get a financial advisor?

Many people wonder, when to get a financial advisor? Who needs a financial advisor?   If you are living from paycheck to paycheck you do not an advisor. You can save at least 20% of your income you may need a financial advisor. Before you hire a financial advisor, ask yourself if have the time to plan, evaluate, and monitor your financial portfolio. You may need an advisor if you need to reevaluate your finances if you recently married, divorced, or widowed. 

Difference between financial advisor and financial planner

The difference between financial advisor and financial planner can be summarized in the table below

Financial Advisor	Financial Planner
Financial advisors help their clients manage money.	Financial planners create strategies to help their clients make financial plans and reach financial goals.
They can have a much larger area of focus. Other than planning they can be involved in life insurance, real estate or accounting service. They may help place short-term traders or provide a banking account.	They rely on strategic portfolio allocation for investment. They focus on the long term.
Advisors have a Series 65 securities license. They may hold additional licenses depending on the services they provide.	Planners can hold a variety of licenses like certified financial planner, certified financial analysts, or certified investment management analysts.

 

 

 

Also read: Basics on tax accounting and 5 key principles to make a note!

How to choose a financial advisor?

Most of us need help managing our finances. Research from the National Financial Education Council indicates the lack of financial knowledge can cost an average American $1200. What makes a good financial advisor? A good financial advisor can help you reach your financial goals faster. Here are some tips on how to choose a good financial advisor. 

What to look for in a financial advisor?

Finding a good financial advisor can be challenging, especially since they will be handling your assets. But how do we answer to what to look for in a financial advisor? Here are some tips –

• Before you begin looking for a financial advisor decide what aspects of your financial life you need help with. 
• Ask for references from friends and family and why.
• Find a fiduciary interested in investing in their ongoing education around tax planning for retirement saving. 
• Check their credentials and verify if they are certified financial analysts or certified financial planners. 

How to find a financial advisor you can trust?

There are no federal regulations on people who call themselves financial advisors. Then how to find a financial advisor you can trust? 

• You need to evaluate a potential financial advisor, ensure they are good for you and your money.  
• Some advisors are bound under fiduciary duty i.e. they are duty-bound to work in your best financial interest. While some advisors are bound under suitable standards i.e. they must suggest suitable products for you. It is important to find out how they earn their money. It will help you understand if their recommendations are better for you or them.

Also read: What is fund accounting, key principles, & responsibilities

Can a financial advisor steal your money?

The answer to the question is, yes they can a financial advisor steal your money? Most advisors strive to generate rich returns, unfortunately, some financial advisors may indulge in practices to cheat you. They may cheat you in the following ways –

• Commingling or adjoins their names with yours on the titles of your investment account to give them unauthorized access to use your funds at their restriction.
• If you notice a large number of trades in your account occurring without an increase in value, the advisor could be churning your account. 
• Invest your money in a Ponzi scheme.
• Embezzle your money.

Have multiple financial advisor meeting

You need to shop around. You may need to talk with multiple professionals. During the financial advisor meeting here are questions to ask a financial solution advisor. The questions will give you an idea of how they operate.  

• How frequently will they communicate with you?
• How do they measure financial advisor ratings?
• Do you need to fit into their model or will they make a customized plan for you?
• Ask them about resources they have access to?

Also read: How to hire the best CPA in 2021

What to ask a financial advisor

Knowing what to ask a financial advisor will help you hire a good financial advisor. There are over 300,000 financial advisors in the United States. Financial advisors may go by other names like – Financial planners, wealth managers, or financial consultants. Asking the right questions will ensure you are hiring someone with the right expertise.

Questions to ask financial advisor in the first meeting 

Some questions to ask financial advisor in the first meeting are:-

1. Are you 100% fiduciary?

Unfortunately, most financial advisors will answer no. Most advisors are dually registered. You may wonder if are recommending something to meet their targets.2. 

2. What do you specialize in and how many clients do you have? 

This is a standard meeting checklist. Like attorneys, financial advisors have specializations. Your financial advisors should have the expertise to help you reach your financial goals.  

3. How many clients do they have? 

Will indicate how much time they will spend on your portfolio. An average experienced lead advisor has 96 clients.

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Questions to ask a financial advisor about retirement

These questions to ask retirement planners should indicate their skillset. Some questions to ask a financial advisor about retirement are:-

4. Which services do you provide your clients? 

Some financial advisors are retirement investment advisors. They help you pick investments that match your risk tolerance and time frame. 

5. What are your qualifications?

Pick a retirement planning financial advisor with an advanced financial and retirement planning education or Retirement Income Certified Professional. Your financial advisor can have other certifications.

Questions to ask your financial advisor during the annual review

Some questions to ask your financial advisor during the annual review are –

6. Is my investment on track?

You probably have several financial goals and accounts. During your annual financial review, you should review your priorities and your saving and investment strategies to meet them. You may need to change strategies if your priorities have changed. Review if your asset mix continues to reflect time-frame, risk-tolerance, needs, and preferences. 

7. Am I saving tax-efficiently?

Other than a diverse portfolio, you need to have different approaches to help reduce or manage your taxes more efficiently. You may not have control over how markets can perform. Your advisor should use accounts that offer certain tax benefits.

Questions to ask your financial advisor about your portfolio

Some questions to ask your financial advisor about your portfolio are:-

8. How has my portfolio performed?

You judge your portfolio based on what you have told your financial advisor. If you told them you have high-risk tolerance and want high returns, your portfolio should show that. Your advisor should explain if your portfolio has not performed well. 

9. What is my net worth?

The average net worth of US citizens aged 55 to 64 was $795,000. You need to learn your net worth compared to the previous year. If your net worth is unchanged or reduced the advisor should explain.

Questions to ask your financial advisor if their services are fee-based vs fee only

You need to understand how your advisor gets paid. Your advisor may be fee-based or fee-only. Fee-only financial advisors are directly paid by clients. The fees may be hourly, yearly or a percentage of assets managed. They do not receive a commission for the financial products they recommend. Fee-based advisors take client fees but also receive payment from other sources like receiving a commission from financial products their client purchases. This can lead to a conflict of interest.

Questions to ask a fiduciary financial planner

Here are some questions to ask a fiduciary financial planner are –

10. Is my financial advisor a fiduciary?

Some financial advisors are registered investment advisors or RIA. They are held to a higher standard to protect the investors. Fiduciary advisors need to put their client’s interests at all times.

11. What is a fiduciary?

A fiduciary is a person or legal entity (bank or financial firm), that has the power to act on behalf of a person (beneficiary or principal) in total trust, good faith, and honesty. A fiduciary advisor can act buy or sell securities on your behalf without requiring your express permission before each trade. Fiduciary is held to a higher standard than non-fiduciary advisors.

12. What is the difference between fiduciary advisors and financial planners?

Fiduciary advisors are held to a higher standard of accountability. Financial planners can sell investments that are suitable to the clients. 

13. What are fiduciary financial fees?

Fiduciary financial advisors are fee-only advisors. They do not charge a commission on the sale of financial products. They may charge a flat fee or hourly rate. They may charge a percentage based on assets under management.

Investment questions to ask your financial advisor 

Investment questions to ask your financial advisor are-

14. What is your investment philosophy?

It is important you and your financial investor have similar investment philosophy or can align to your investment style. Your advisor should understand certain investments may not be suitable for you. They should convince you of their strategy when markets are down. Your advisor should provide you with tailor-made solutions. 

15. How will you track my investments?

Your financial advisor should be tracking your investment performance daily. Whether your investments will help you reach your long-term financial goals. They need to weigh the short-term movement against the long-term strategy. Ideally, you need to have a diverse portfolio. They should rebalance the portfolio so you stay on track to meet your financial goal. 

Questions to ask for financial advisors for young adults?

Here are some questions financial advisors for young adults are –

16. Can you explain a financial concept to me?

A financial advisor should be able to sort out a lot of information to understand what is suitable for you. They should be able to communicate persuasively and in terms, you can understand. They should avoid using jargon while explaining different financial instruments.

17. What kind of clients do work with?

Before describing what you are looking for, ask them this question. If their typical client matches you, then you are a good fit. You want an advisor who works with young adults.

Financial planning questionnaire for your financial advisor

Financial planning questionnaire for your financial advisor –

18. What is included in your financial planning service?

Some financial advisors only provide retirement planning services. While some work with other areas of financial planning like taxes, estate planning, college funding, etc.

19. Are there additional fees for financial planning?

You need to find out if the financial advisor charges additional fees for financial planning. You need to plan to meet your financial goals. Additional fees may dissuade you from consulting with the advisor on an ongoing basis. 

Portfolio management interview questions for your financial advisor

Here are some portfolio management interview questions for your financial advisor –

20. What is your attitude to risk? 

Your financial advisor should be able to identify risks and manage your portfolio accordingly. They should understand your financial assets, goals, and your attitude towards risks before they decide on your behalf.

21. What is the role of reporting and forecasting play in your work?

Financial advisors need to report to you on a monthly or quarterly basis. You need to ensure your money is in good hands.  

401k questions to ask your financial advisor

Here are some 401k questions to ask your financial advisor-

22. Do I need a financial advisor for my 401k?

You do not need a financial advisor to manage 401k if you understand which mutual funds to select for your 401k. There are several advantages of hiring a financial advisor for your 401K. They will help maximize returns.

Best certified financial planner

The best certified financial planners are all certified. You can question them with.

23. What credentials do you hold?

Credentials for financial advisors can vary. They may hold ed Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and Chartered Financial Consultant (ChFC).

24. What specializations do you have?

Financial advisors can opt for specialized credentials like – Retirement Income Certified Professional (RICP), Certified Management Accountant, and Accredited Investment Fiduciary.

Some questions about money management to ask a financial advisor.

Here are some questions about money management to ask a financial advisor –

25. Does your firm hold my money and investment?

Your financial advisor should not get in contact with your assets. Instead, there should be a contract with a reputable custodian. The custodian holds your assets, processes all transactions, and collects dividend and interest payments. 

26. What happens to my money if something happens to you?

Your advisor should have a game plan in place if they retire, leave the firm, or are unable to continue to work.

Average financial advisor returns

27. What are the benefits of working with a financial advisor?

The financial advisor can improve your portfolio performance by 1.5% to 4% in the long term. The financial advisor role is not limited to money management, but they can help with financial planning while you pursue your other goals. They not only can help you reach long-term and short-term financial goals but also provide holistic financial planning like estate planning, family support, health care, insurance, and charity.

Standard fees for financial advisors 

The standard fees for financial advisors will depend on the fee structure. There are five fee structures most financial advisors use:-

Best fiduciary investment companies.

Fees	Description
Percentage of asset under management	0.25 to 0.5$ for robo-advisor and 1% for in-person advisor.
Hourly fees	$200 to $400
Annual fees	$2000 to $7500
Commission	Additional compensation is earned after purchase.
Performance-based fees	Additional fee charged if the defined benchmark is outperformed.

 

Best fiduciary investment companies

Good advisory firms should offer comprehensive planning and financial services to help you manage your finances. The advisor should help you set up realistic financial and personal goals. The best fiduciary investment companies are:-

• Salem Investment Counselors
• Dana Investment Advisors
• NewSouth Capital Management
• Montag and Caldwell
• Brandes Investment Partner

Certified financial planner websites

While looking for financial planners online, you will range from automated investment services called Robo-advisors to a traditional in-person financial service provider. The fees and minimum account balance of websites can vary. Here are some certified financial planner websites you can use –

• Vanguard Personal Advisor Services
• Facet Wealth
• Zoe Financial
• Betterment Premium
• Harness Wealth