Whether it’s paying for college, building your retirement nest egg or simply better managing your financial life, a good financial advisor can be a great help.
While we’ve done this legwork for you by hand picking the financial advisors our members work with, there are still some key questions you need to ask when sitting down with a financial advisor for the first time.
Most good advisors will give you a free initial meeting to discuss your goals and your asset mix. That is the time to ask these questions, not after you’ve signed on the dotted line.
4 Questions to Ask a Financial Advisor
Are you a fiduciary? A fiduciary manages your assets and has a legal and ethical obligation to put your interests first. For a financial advisor, that means helping you make decisions that are in your best interest, even if it means reduced compensation – or no compensation – for the advisor.
Believe it not, this hasn’t always been the case with financial advisors.
Just this year, Congress finally passed a bill that makes financial advisors act in the best interest of their clients. This wasn’t legally mandated until now. And even now there are still numerous loopholes.
This is a simple yes or no answer for a financial advisor. Anything else should send up a red flag.
How do you get paid? There are several ways a financial advisor can answer this question. The answer you’re looking for is someone who charges a percentage (usually around 1.0 to 1.5%) of your assets.
This means the advisor only makes money when you do. If your account grows, he/she makes more money. And if you don’t do well, neither do they. They’re in it with you.
Commission-based advisors make their money in a lot of ways that don’t benefit you, so it’s best to avoid them if possible.
What certifications do you hold? Every certification has its own value, so it’s good to know if your financial advisor holds any, and if they do, which ones.
The most popular:
CFA: Certified Financial Advisor. One of the most difficult financial certifications that focuses on investing.
CFP: Certified Financial Planner. This indicates that the holder has a strong knowledge of all aspects of financial planning (investments, wills, insurance, etc.).
ChFC: Chartered Financial Consultant. These advisors are expert in insurance and estate planning.
CPA: Certified Public Accountant. These are tax specialists.
Many advisors will hold more than one of these. And some won’t hold any. More isn’t always better. Some highly qualified advisors may not be the kind of person that will listen to you and build a strategy you’re comfortable with. Work with someone who is qualified, but has your interests as the top priority.
Anything I should know? All registered advisors have a Form ADV on file. Check it out before you meet with them. It will tell you if there are anything issues with the advisor’s past that you should know about.
Be Prepared
You will need to cover a lot of ground to have enough information to make a good decision, so be organized. When you meet, make sure you have your questions ready as well as your goals. The first meeting is free but will likely only last an hour.
If you like this article and want to read more about planning for retirement, check these out:
And always remember, we are here to serve you. Whether it’s with our retirement calculator or by getting you in touch with one of our hand-picked investment advisors.