Working with a financial advisor is definitely not a small decision, but one that can greatly impact your overall financial net worth. Therefore, before you sign on with any particular financial professional, be sure to take the time to get to know them up front and ensure the relationship is a good “fit” for you and your particular goals. Below, we outline 7 great questions to consider asking an advisor prior to working with them:
Key question #1: What is your background and what are your qualifications?
Just as how you would not likely begin seeing a doctor without proper medical school credentials and/or qualified training, you also should not begin working with a financial professional (or any professional, for that matter) who lacks the proper qualifications. When speaking to a potential advisor candidate, make sure you ask about their educational training, certifications, and other qualifications they may have received in this space.
Key question #2: What does your compensation structure look like?
Advisors are generally paid one of two ways. If an advisor says they are “fee-based”, this can mean that they charge a fee to work with them (hourly, or as a percentage of your investment account), and may also make certain commissions/fees based on providing you with insurance, an annuity, or some other type of product.
An advisor who is “fee-only” is someone who only charges a flat fee (generally as a percentage of the amount you invest) and does not make any money from commissions or other fees. *Typically, an advisor fee might be anywhere from 0.8-2% of your investable assets. Be sure to ask your advisor how they’re compensated before getting started (though they should disclose such information themselves).
Key question #3: What does it mean to be a fiduciary and are you considered one?
To be a fiduciary is to have an obligation to act in the best interest of the client. Not every financial advisor is a fiduciary, but a good number are so be sure to ask! Some are held to the “suitability” standard, whereby they simply have to provide suitable options for their clients. Be sure to ask your financial advisor about their fiduciary or suitability requirements/duties.
Key question #4: What is your investment philosophy?
Every advisor has their own thoughts on how to approach investing. Some prefer to take a more “wait and see” approach, allowing investments to grow and prosper without getting too heavily involved while others attempt to time the stock market and are constantly making adjustments to their investment holdings. Some advisors employ a bit of both of these methods. While there is not necessarily a right or wrong investment philosophy, there certainly may be one style or approach that suits your needs and risk tolerance more than another. Before you begin working with an advisor, make sure you understand how your money will be invested so that you can have a high level of comfort with their overall process.
Key question #5: How often will we meet or connect?
Many advisors are willing to meet with their clients as often as the client would like, but some may feel it only necessary to meet at certain times of the year. As with anything else, make sure you understand what the level of care or service looks like from your advisor so that you can set realistic expectations going forward.
Key question #6: What does a typical client of yours look like?
Some advisors have specific areas of interest or qualifications that make them most useful to particular groups of clients. If you are looking for a specific type of advisor (perhaps one that has experience guiding self-employed individuals or those navigating life post-divorce), be sure to ask about their typical client profile.
Key question #7: Do you have certain account minimum requirements?
Not all advisors will take on a new client with little assets to invest so they may impose certain investing minimums or thresholds in order to begin working with you. Before you go down the rabbit hole of filling out any paperwork or beginning to get the overall investing process started, make sure you understand if you’re truly a good “fit” for this advisor and if you meet their minimums.
Still looking for a financial advisor or not sure if you should begin working with one? Let us know! We’d be happy to help you talk through your options.
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