You spent a long time saving your funds to create an investment portfolio. You want to ensure that the funds grow, and you enjoy a long retirement. Here is what you should ask a financial advisor. When you went to find a financial advisor, you didn’t realize that there were so many available. It’s beneficial to find an investment advisor who shares your ideas of good investments and wants to help you succeed.
But how do you find your best option? It’s a good idea to interview several investment advisors before making your selection. During the interview, there are several key questions you need to ask a financial advisor to determine if they’re a good fit for your needs.
Here’s are the 9 key questions to ask a financial advisor
- Are You a Fiduciary?
- What Qualifications Do You Have as an Investment Advisor?
- How Do You Receive Your Money?
- How Often Will I Have Access to You?
- What Is Your Philosophy for Investing?
- Do You Have a Custodian and Who Is It?
- What Do You Expect My Tax Liability to Be If I Invest With You?
- How Do You Plan to Handle Asset Allocation?
- What Are My Total Costs Going to Be?
1. Are You a Fiduciary?
A fiduciary is an advisor who always works in the best interest of their clients. While you might think that all advisors would do that, some work in their own best interest. An investment advisor who isn’t a fiduciary may steer you towards more expensive and risky stocks or bonds to receive a higher commission or some other advantage for themselves while placing your funds in something riskier than you want.
2. What Qualifications Do You Have as an Investment Advisor?
You may get an alphabet soup of letters after your financial advisor’s name because there isn’t one common qualification. No matter what title they use, it’s your job to vet them and ensure they can handle your investments properly. Financial Industry Regulatory Authority’s professional designations database can decode all those letters for you and give you a better understanding of each person’s qualifications.
This database explains any educational qualifications of each set of letters along with what the letters mean. It can also let you know if it’s an accredited designation. If you can check the person’s current status and disciplinary actions, it’ll be in the database.
3. How Do You Receive Your Money?
There are a number of ways that a financial advisor gets paid. You don’t want to work with one who works on commission, because they may steer you to options that aren’t always right for your portfolio so that they make a higher commission. You want to look for an advisor who works on a fee-only basis. They may set up the fees in a variety of ways, but it still needs to be fees only. They may charge a percentage fee, a flat fee, or
an hourly fee. When they charge a percentage fee, it’s usually one percent of the value of your portfolio.
4. How Often Will I Have Access to You?
You want to know how often you can contact your financial advisor. In many cases, you’ll have a certain set number of scheduled meetings each year. This question helps you understand if your financial advisor is open to your emails and phone calls outside of these scheduled meetings.
5. What Is Your Philosophy for Investing?
You and your financial advisor need to share the same philosophy when it comes to investing money. This is essential for you to believe in their advice and maintain the course even when things seem shaky. You’ll trust their experience and advice. You need to know that they’re going to get you where you want to go financially.
A follow-up question for this one should be “What type of client do you typically work with?” You want to make sure that they’ve worked with clients in similar situations before you. You want to know that they’re comfortable working with your goals and funding.
6. Do You Have a Custodian and Who Is It?
For a financial advisor, a custodian is a person who holds your funds and operates as an independent party. Wondering how serious this is? Bernie Madoff acted as his own custodian, and everyone remembers how that worked out for his investors. The custodian provides an essential security blanket for you. You want to be able to independently verify how much money that you have in your accounts at any time. You don’t want to solely rely on your financial advisor for this information.
7. What Do You Expect My Tax Liability to Be If I Invest With You?
First, you want to know that your financial advisor is thinking about the tax implications of your various investments. Second, this question can lead to a discussion about expected taxes and fees to determine the amount you might expect to make from your investment, and really, isn’t this the reason that you’re investing, to begin with?
8. How Do You Plan to Handle Asset Allocation?
You’ve probably heard and read a lot about diversifying your investment portfolio. The reason for a diverse portfolio is to minimize or maximize your risk. Of course, with greater risks comes greater rewards when the investment does well. Unfortunately, you can lose a lot too. If you’re older and planning to retire within the next decade or two, you probably want to take a very conservative approach. The younger investor might use an asset allocation that offers greater risks, such as primarily stocks, to reap greater rewards. If they lose money, they have more time to make up for these shortfalls.
9. What Are My Total Costs Going to Be?
You don’t just spend the money that you want to invest. You’re going to pay fees on top of that money. Before choosing a financial advisor and handing over a check, you need to know how much the check needs to be. You need to be very cautious concerning fees. While the fee might seem small, they can add up over a 30, 40, or 50-year period and take a bite out of your savings. You don’t want to miss your goals because fees ate up your principal.
At Bogart Wealth, we understand how important the answers to these questions are for you. We’d like to have a chance to sit down so you can ask a financial advisor and discuss these questions to see if we’re a match for your future investing plans. Contact us today to learn more or schedule an appointment.
