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The Most Important Questions to Ask a Financial Advisor

A financial advisor is a type of investment and financial professional that’s well-versed in helping people manage their money. Financial advisors work to create a personalized investment strategy financial plan for you that’s in line with your future goals. They can also assist with investing, saving, budgeting, insurance, retirement planning, and more. There are numerous benefits of a financial advisor and they are an incredibly valuable resource for making the most of your finances. 

Whether you are just beginning to search for possible financial advisors to work with or you’ve already begun working with one – communication is key to ensuring your needs are fully met. If you don’t know where to start, we’ve put together some top questions to ask a financial advisor. 

Ready to learn more about the benefits of a financial advisor and the right questions to ask a financial advisor? We’ll also show you how to find a financial advisor. Take a look at our guide! 

Benefits of a Financial Advisor

Holistic approach to financial health

Financial advisors offer a host of different services. Most importantly, they offer multiple services in conjunction with one another. Financial advisors integrate different areas of your financial life to provide a holistic approach. 

Say for example you want to prioritize long-term investing. Your financial advisor could help you create a pathway towards achieving this goal while taking other important factors into consideration, such as tax strategies or family goals. Since most of us tend to view different areas of our finances as separate from one another, working with a financial advisor is one of the best ways to ensure your financial plan is comprehensive and takes all aspects of your life into account. 

Mitigate risk 

There’s always some risk when it comes to investing. However, that doesn’t mean you should take on an unnecessary amount of risk. It’s important to understand what your risk tolerance is and which investments are within your comfort level. A financial advisor can help you pinpoint your ideal risk tolerance and offer individualized solutions based on your personal situation. 

A financial advisor can also help you mitigate risk, regardless of what your risk tolerance is. Financial advisors typically have strategies at their disposal to help protect your portfolio against adverse market fluctuations. One common strategy is diversification, or ensuring your investments are adequately spread out across different assets and industries. 

Stay the course

Volatile markets or declining investments can be expected from time to time. The downside is that many people fall prey to their emotions during periods of heightened uncertainty. Some investors may feel tempted to sell their positions or try to time the market altogether. Regardless of how comfortable you feel with your investing strategy, it can feel incredibly tempting to change course. 

Financial advisors offer a voice of reason during turbulent political and economic times. They can provide a perspective based on experience and research to guide you through periods of uncertainty. You’ll feel more confident and focused on your financial plan when you work with an advisor. You’ll also be more likely to stay the course and reap long-term benefits. 

Questions to Ask a Financial Advisor

Are you a fiduciary?

A fiduciary is someone that is legally required to act in the best interests of their clients. Contrary to popular belief, not all financial advisors are fiduciaries. Financial advisors that aren’t fiduciaries may be more incentivized to sell investment products rather than ensure you are receiving the maximum value. You can only trust a fiduciary when it comes to ensuring your best interests will be upheld. 

What services do you provide?

Most financial advisors offer a holistic approach to financial management and investing. That said, there are always exceptions to this rule. You want to make sure your financial advisor is well-experienced in the areas that matter most to you, and you can do this by asking about the services they provide. 

It’s important to work with an advisor that understands your tax situation, insurance needs, estate planning needs, and even your debt management needs. Some advisors will also offer additional resources to help you track your investments, develop a budget, and stay in the know when it comes to your finances. 

How are you paid? 

Different financial advisors can have different fee-structures. Some may charge a flat annual fee (typically starting at 1%) while some may charge hourly fees or additional fees for certain services. You want to ask about fee-structures to get an idea of how much an advisor will cost you but also to understand how they are incentivized. 

It’s most important that your financial advisor is a fee-only advisor. This means they won’t receive a commission for selling you products. Fee-only advisors are paid through your contributions alone and are more likely to uphold your best interests. 

Do you specialize in a specific type of client?

Plenty of financial advisors serve a wide variety of clients. However, there are some that focus on specific types of clients and specialize in niche financial needs. Some advisors might specialize in retirement, family wealth, divorce, debt management, investing, or another field. Depending on your specific financial situation and needs, you might want an advisor that frequently works with people in a similar financial situation as your own. 

What are your credentials?

The title of a financial advisor isn’t a credential in and of itself. A field of specialty also won’t tell you how qualified an advisor is to handle your finances. You want to look into your financial advisor’s credentials. 

There are numerous different credentials a financial advisor can have, but some of the most common include CFA (Chartered Financial Analyst), CFP® (Certified Financial Planner), PFS (Personal Financial Specialist), or CIMA® (Certified Investment Management Analyst).  

What are your minimums?

Most financial advisors require a minimum investment amount or minimum fee in order to take you on as a client. Investments minimums aren’t typically something you need to worry about if you are a high-net-worth-individual. 

However, if you have under $1 million in investable capital this is a good question to bring up. Investment minimums range depending on the advisor – some might be as low as $100,000 while some firms might require at least $1 million or more. 

What is your investment philosophy? 

Your financial advisor will have considerable influence over your investment decisions. You will need to trust their perspective and hold onto their investment philosophy during periods of volatility when it might be tempting to deviate. Therefore, it’s essential you and your advisor are on the same page when it comes to investment philosophies. 

Do you want someone that is focused on the long-term, risk aversion, lower-cost investments, etc.? There are numerous different investment strategies and your advisor is likely to have their own unique combination of a few. Ask about theirs and make sure you fully understand it and are comfortable with it before working with your advisor. 

What asset allocation do you use?

Diversification is the golden rule when it comes to portfolio management. Diversification helps mitigate the adverse effects of market volatility and can help you achieve a higher return. Your financial advisor should be well-versed in understanding how to create a customizable and well-diversified investment portfolio that suits your financial goals. Ask them what asset allocations they use to ensure your portfolio is well-diversified. 

How can I have access to you? 

Most financial advisors will regularly meet with clients on an annual, semi-annual, or quarterly basis. Most advisors will also take supplemental meetings at your request. You want to ensure you’ll have access to your financial advisor on a basis that you are comfortable with. 

Will they be available for phone calls outside of regular appointments? Will you receive weekly or monthly emails? Negotiating communication details beforehand is essential for a harmonious relationship with your financial advisor. 

How to Find a Financial Advisor

By now, you’ve probably asked yourself “do I need a financial advisor?” Depending on your financial situation and coupled with the benefits of a financial advisor, you might have decided it’s time to start looking for a financial advisor you trust. 

Choosing a financial advisor is one of the most important decisions you can make about your finances. It’s important not to rush the process and to only settle for a financial advisor you truly feel comfortable with. 
Don’t know where to start? You can find a financial advisor through your employer, by asking friends or family, going through search engines, or by targeting candidates in your local area. You can also read more about how to find a financial advisor and how to choose a financial advisor here.