We were recently asked to speak to a group of new investors who were admittedly hesitant to meet with a Financial Advisor. Some were scared of being judged, others afraid to learn they were not on track for their age group or life stage. The conversation emphasized the amount of anxiety that can come with taking this very important step and prompted us to remind our audience what they should ask a potential Advisor in order to feel more comfortable with taking the next step of meeting an Advisor for the first time. Equally important, there are things you can ask yourself to ensure that you have found the right Advisor for your unique needs.
Your Financial Advisor will be the person you’ll count on to help you make the best decisions for your financial future. They will help prepare you for retirement, plan for paying for college, help you to save for a house, and so much more. This is no small responsibility. Whether you already have an Advisor or are currently considering hiring one, there are some important questions you should ask yourself and him/her before trusting them with your money.
Let’s start with the questions you can ask your potential Advisor. This person should answer these questions openly and without making you feel like you are overstepping any boundaries. The answers should also not leave you feeling more confused than you were when the conversation started. After all, if you can’t have an open, easy, and enjoyable conversation with them, how will you feel discussing the intimate details of your personal financial situation?
- How do you determine which investments are best for me and my family? It is crucial to have an Advisor that will consider the breadth of your situation -- your future goals, your current assets, your tolerance for market fluctuations, your family life and plans for your children and/or parents, etc. If they are not an Independent Financial Advisor, what limitations do they face regarding what recommendations they can make? An Independent Financial Advisor will have the ability to offer unbiased advice and virtually unlimited investment options.
- Are you a fiduciary? Being a fiduciary means that the Advisor must, by law, suppress their own interests and put the interests of their clients first. Many Advisors would certainly do this anyway, but holding the fiduciary designation will add a layer of protection and peace of mind for you.
- What is your fee structure and how much will investing cost me? Some Advisors collect a commission based on activity and trades placed in your account, while others charge a flat fee based on assets under management, regardless of activity. And then there are Financial Advisors who offer both fee-based wealth management as well as commissionable investment products. The Advisor should explain how they get paid and offer examples that are relevant to your situation and investable assets. You should never be left wondering how the accounts will be paid for and how much you will be charged.
- How long have you been in business and how long do you plan to be working as an Advisor? While longevity is helpful when it comes to making sound decisions based on experience, you may find that a newer Advisor has advantages, such as technology, on their side. Don’t assume that an older Advisor is better or that a younger Advisor lacks experience. Just be sure that if the Advisor you are considering is new to the business that they have the support and mentorship needed to make sound recommendations. If the Advisor is older and maybe close to retirement, they might not be able to remain your Advisor for your life. Do they have a succession plan in place? Who will take over your accounts if something happens to him/her?
- Do you simply manage investment accounts or do you provide full-service financial planning? What services are offered? There are many types of Financial Advisors and all types of investors. You may want someone to help you determine your life insurance needs, tax and estate planning needs, and complete budgeting. Or, you may prefer to handle that stuff on your own and simply have an Advisor who will manage your retirement and other investment accounts. This is entirely up to you, but make sure you are hiring the person who meets your specific objectives.
- Do you work with other professionals who you can refer me to? This would include tax accountants, estate planning lawyers, social security experts, etc. We refer our clients to other professionals all the time. We also invite our strategic partners to our client events, which provides a great service that we might not be equipped to provide on our own. If you need a Financial Advisor, you’ll likely need to work with other financial and tax professionals at some point, too. Who is in their network that can help you?
Questions to ask yourself when you finish your initial meeting or phone call with the potential Financial Advisor:
- How did this person make me feel? If you do not leave feeling like you and the Advisor could have easy conversations and that you could truly trust them, then maybe this is not the right person to manage your money. You should leave feeling uplifted, empowered, and excited! At the end of the day, if you do not feel comfortable you will not be able to ask the questions needed to get you to your goals. Did they speak down to you or make you feel like your questions were not warranted? If so, move on.
- Do I like this person and would I hang out with them socially? Ultimately, the person managing your money, will become a friend. They will get to know you beyond your finances and should understand your family dynamic, as personal life and finances overlap in a big way.
- What can I expect at our first meeting? Assuming, you are emailing or chatting on the phone first, this question will make sense. Find out what you should bring with you and what you should have prepared for them prior to going into their office. Knowing what to expect will ease your nerves and enable you to arrive with confidence. All Advisors are different, but with out prospective clients, we always stress that the first meeting is simply a chance to get to know each other. It’s a no-obligation to share ideas and pass information to the Advisor for consideration, without any recommendations. We only make recommendations at a second (or later) meeting. This eliminates pressure and allows for a friendly, open conversation.
There are a lot of Financial Advisors out there, all with different personalities. You deserve someone that will help you feel confident that your money is in good hands, and that you have an expert on your side who will explain things to you in a way that is not over your head. You don’t have to know the ins and outs about investing to be successful at it. You simply need someone on your team who knows the stock market and can help you get where you want to be. Be picky and keep your standards high. Happy searching.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.