There are very few professionals whom you will do business with which are more important than your financial advisor. Obviously, you take great care in selecting medical professionals, legal professionals, and professionals with whom you entrust your children but when you think about it, none of those relationships would be able to continue without the help of your financial advisor.
This is the person who helps you to grow your hard earned money and assists you in providing for all of the needs of those you love. As you interview several potential candidates there are certain things to ask a financial advisor to determine if they will be a good fit for you. And after the interviews, there should be much thought and careful deliberation before you select your trusted financial advisor.
The Most Important Question
The first question to ask anyone who is going to be managing your assets on your behalf is, “Are you a fiduciary?” The only satisfactory answer to this question is yes. What this means is that the person is legally and ethically bound to work for your best interests. You also want to be sure that your potential advisor has never been disciplined for any infractions of their code of ethics and that their firm has also never received any disciplinary action against them with regard to ethical behavior. Once that fact is established you should begin to explore more about the firm and the processes and procedures in place to protect your assets and your personal information. The potential firm and advisor should at minimum meet all of the codes of ethics and compliance set forth by the Financial Industry Regulatory Authority, the Securities and Exchange Commission and the state and regulatory agencies.
What is the Cost of Your Service
Knowing what you are going to pay for financial advice is important and so is a complete understanding of all fee structures. You might only be using certain services or aspects of the firm’s services at this point but your needs could expand or change in the future and you want to know the full potential cost of investing via the firm. Most financial firms are fairly transparent about their fees but some do have a more unique fee structure that might not be as up front as others.
What is Considered Standard or Normal Communication?
Communication methods and amounts are going to be a very important piece of information for you to understand. This is going to be what you base your expectations on for conducting future business. There is really no right or wrong answer but more an answer that is either right or wrong for you. If you want to entrust your advisor with most decisions and you only want monthly or quarterly updates then less communication is going to meet your needs. But if you want to have more input and a hands on approach then you will want to be certain that all potential financial advisors understand that fact and can work to meet that specific expectation. You will also want to learn about any options that you will have for additional education about certain financial services, programs or opportunities that the firm might offer. Many investors start out with only a very basic understanding of their financial goals but would like to learn more about upcoming opportunities or new investment plans, strategies concepts. Knowing how much information and communication you can count on from your advisor will let you decide how well they will mesh with your personality and desired level of involvement.
Are There Personalized Service Plans?
Everyone has their own goals and financial objectives that are as unique as they are. So you might be looking at the firm’s services list and be uncertain about how well they will meet your needs. It is never a bad idea to ask if your financial advisor will tailor a plan to meet your specific needs currently as well as in the future. You might want to focus your current investment strategy to saving for children’s college funds but later you will want to shift that focus to growing your retirement nest egg. Or you might decide that you are interested in purchasing a vacation home and you will want your advisor to assist you in reallocating assets to purchase that property. Never be afraid to ask for a customized service package when you are paying a professional to assist you. It is the best choice that you can make financially and it will also provide you with the most confidence and satisfaction from the services.
Who Do You Feel You Work Best With?
Asking a direct question can get you more information than you will ever acquire with vague or general lines of questioning. Simply asking your potential advisor which types of clients that he or she works best with will provide you with insight into the possible working relationship you would have. Knowing that the advisor prefers client input and regular conversations is helpful in determining who you will work well with. In the end, this person will know some very private information about you, your family and your financial goals so you want to be able to speak openly and have a comfortable relationship built on trust and respect for one another.
Your End Goal
As you begin to compile your list of things to ask a financial advisor, you might find that you are stopping to give some thought to what you are expecting and how you would most like to interact with your advisor. If this is your first experience interviewing for an advisor you might discover that you are learning as much about yourself and your expectations as you are about the candidates and their offerings. But all of that information is important and critical to the long term success of your relationship with your advisor and your financial future. The more effort you put into the selection process and establishing your expectations the better your potential for financial success will be.