Questions to Ask A Financial Advisor
Adapted from Forbes Magazine, May 9, 2013 (To view the complete article, click here)
1. How do you charge for your services, and how much?
Ask whether there's an initial planning fee, whether they charge a percentage for assets under management, and whether they make money from selling you a specific product. Not only should you know how much their services will cost you, but you want to know if they have an incentive to sell you certain products from companies with whom they do business.
2. What licenses, credentials or other certifications do you have?
Of the four main types of financial advisors, the certified financial planner (CFP) designation is harder to achieve than Chartered Financial Consultant (ChFC), because the former requires a comprehensive board exam. If you want someone to manage your money, look for a registered investment advisor (RIA).
3. What services do you/does your firm provide?
You want to have clear expectations regarding what the advisor will and will not do for you. Some advisors only provide advice on your investments; others provide comprehensive financial planning around retirement, insurance, estate planning and tax planning — or have a team that does. Go with someone whose offerings suit your needs.
4. What types of clients do you specialize in?
Some financial advisors have a niche and if you have a specific interest (or if you're recently divorced or widowed) — you'll want to find one who concentrates in that area.
5. Could I see a sample financial plan?
There is no one set structure for a financial plan, which means there is wide variation. Some people might give you 50 pages of stuff you don't understand like charts and graphs, and another planner might provide a five-page snapshot of your financial situation. With a sample, you can really help hone in on what works for you and what doesn't.
6. What is your investment approach?
If you have a strong preference for a particular investment philosophy, ask the advisor what his or hers is. For instance, if you prefer to use low-cost funds, you can ask whether they plan to used actively managed funds or passive investments.
7. How much contact do you have with your clients?
Some of planners hold an initial planning meeting and then you see them once a year, and that's all you get. Others might have quarterly check-ins. Generally, the more support an advisor provides, the greater their fee. Decide which approach would work best for you — and how much you're willing to pay for it.
8. Will I be working only with you or with a team?
This question will also help you understand who will actually be handling your account. One person or a team approach can work — one isn't better than the other. It just depends on your preference.
9. What makes your client experience unique?
This helps answer the very basic question of "Why would I want to work with you?'"
Finally, there's one last question you want to ask of yourself after meeting with a potential planner:
10. Did he or she ask me questions and seem interested in me?
Did they just talk about themselves and their approach to investments — or did they ask about you and your needs? It's hard to believe you'll get credible, personalized advice if an advisor just talks about themselves — or if they stick just with small talk.