Top 10 Questions to Ask a Financial Advisor
Do You Need a Financial Advisor?
I am often asked about the difference between financial coaches and financial advisors. Financial advisors focus on investment strategies and long-term investment planning for money you have to invest. In contrast, my services as a financial coach address the day-to-day management of your finances, helping you build sustainable money habits and achieve financial wellness. Together, we create a comprehensive approach to managing your money effectively.
Why Finding the Right Financial Advisor Matters
Choosing the right financial advisor is crucial to achieving your long-term financial goals like retirement and education for your children. Since it tends to be a long-term relationship, finding someone whose style, investment philosophy, services and fee structure align with your needs is essential.
How to Find the Right Financial Advisor
As a former financial advisor for over a decade, I can offer a unique perspective on what to look for in a financial advisor. Here are ten essential questions to guide you:
Ten Essential Questions to Help You Make an Informed Decision
What are your qualifications and experience?
Why it's important: Understanding an advisor's background, certifications, and experience can give you confidence in their expertise. Additionally, ask if they are a fiduciary, which means they are legally obligated to act in your best interest.
Red Flags: Lack of certifications or minimal experience, and not being a fiduciary.
What services do you offer?
Why it's important: Different advisors offer various services, from investment management to retirement planning. Ensure their offerings align with your needs.
Red Flags: Limited services that don't match your financial needs.
How are you compensated?
Why it's important: Advisors can be compensated in different ways—hourly, flat fee, or percentage of assets under management. Knowing this helps you understand the cost structure, the impact of fees on performance, and avoid surprises.
Red Flags: Hidden fees or a lack of transparency about costs.
How many clients do you have like me?
Why it's important: It's crucial to know if the advisor has experience with clients in your financial situation. If they primarily serve ultra-high net worth clients and you are not one, you may not get the attention or expertise you deserve.
Red Flags: Few or no clients similar to your financial profile.
How will you educate me about financial concepts and decisions?
Why it's important: An advisor who educates their clients empowers them to make informed decisions and better understand their financial situation. Look for a financial advisor who treats you as a partner - after all, it’s your money.
Red Flags: An advisor who doesn’t take the time to explain their recommendations or financial concepts, talks only to your partner, or talks down to you.
How will you choose the investments you recommend for me?
Why it's important: You want someone who chooses investments based on your personal profile, needs, and goals, not because the commission is higher on a certain product, or they want more assets under management.
Red Flags: A cookie-cutter, "one size fits all" approach.
What happens to my account if something happens to you?
Why it's important: It's important to know the contingency plans for your account in case your advisor retires or is unavailable.
Red Flags: No clear succession plan or backup advisor.
What's communication like, and with whom?
Why it's important: There should be a regular contact schedule, and the advisor should also reach out when circumstances dictate, like when a market change or a buying opportunity arises.
Red Flags: Limited availability or being passed off to an associate after signing on.
What is your approach to risk management?
Why it's important: Understanding how an advisor manages risk can help you feel more secure about your investments.
Red Flags: Lack of a clear risk management strategy or unwillingness to discuss risk.
How will you help me reach my financial goals?
Why it's important: This question speaks to the advisor's process—or lack thereof—in helping you achieve your financial objectives.
Red Flags: Vague or unspecific answers, or an inability to provide examples of a structured process.
Get Financially Prepared!
If you'd like to learn more about Quest Financial Coaching and my simple money management strategy, schedule a call here.