Six Question to Ask Your Financial Advisor
Before you commit to a financial advisor or wealth advisor, you want to make sure you are hiring the best person for you and your situation. Start by asking yourself a key question, then check out 6 questions you should ask an advisor before selecting one. This is not intended to be the full list of questions but rather in this confusing field of ‘financial advisors’, the questions below will assist you in selecting the best advisor for you and your family.
1. Why should I work with you? What sets you apart from other Advisors?
Ask the advisor who are their typical clients? Do you work with Gen X, Gen Y, Baby boomers, or young families? Some advisors work with only business owners or specialize in working with women entrepreneurs.
2. How are you compensated? Flat Fee or commission?
You need to know if you are buying products or paying for advice. As the client, are you looking for your advisor to reduce as many conflicts of interest as possible and know they are compensated directly from you, or are they receiving a commission based on the product they are selling? Also, ask if the advisor can be compensated from both fee and commission to eliminate/reduce the confusion.
3. Are you a Fiduciary?
Do you need a fiduciary partner to provide ongoing investment advice that is always in your best interests? An advisory relationship may be most appropriate. If you would prefer occasional notifications and explanations of suitable investments, with no ongoing obligations? A brokerage relationship may be the right choice.
Based on the Security and Exchange definition, a Fiduciary must always put your interests ahead of the advisors. Ask the advisor how they are reducing conflicts. A new regulation called Best Interest intends to narrow the gap between a Fiduciary and other financial professionals, just make sure you understand in what capacity your advisor is working for you.
4. Why type of firm will I be working with?
Are you independent or part of a larger investment business or insurance company. Do they have sales manager and production goals? Understand if the firm they represent sells proprietary products.
5. Why is your investment and planning philosophy?
It could important to have the same investment or planning philosophies. Many advisors look great when the stock market is up, however, what happens with the markets are more volatile? If the wealth advisor has a similar philosophy, they may be able to connect with you and take the emotion out of the advice.
6. What are the costs of working with you?
In addition to understanding how the financial advisor is compensated, you will potentially face other fees -and you will want to understand what they are. Different investment and products have different fees. Ask the advisor if alternatives exist to the recommended strategy and what those fees look like.