A financial advisor can help you build wealth and plan for the future. However, you must work with someone who understands your financial situation. In addition to reading reviews and testimonials, you should ask these questions of a financial advisor to see if they’re a good fit for your needs.
What Questions Should You Ask a Financial Advisor?
1. Are You an Independent Financial Advisor?
An independent financial advisor isn’t affiliated with a bank, insurance agency, or any other company that sells financial products. The biggest advantage of working with one is that you’ll receive financial advice that isn’t biased towards a certain product, service, or brand. For instance, they’re not going to say that you need to take out a loan with the bank they’re tied to.
2. What’s Your Approach to Investing?
Financial advisors can have different investment philosophies. One advisor may develop a tailor-made plan for you, while another might ask you to choose from several templates based on your needs.
They can also have more conservative or aggressive views on investing, so you’ll want to choose one that fits your preferences. If you’re scared of taking risks, you likely won’t mesh well with an advisor that supports high-risk, high-yield moves.
3. Can You Explain a Concept to Me?
Educating clients on financial concepts is part of a financial advisor’s job. They’re not just there to tell you the best course of action but also to help you make an informed decision. Your advisor should be able to explain unfamiliar concepts in a way that is easy to digest. You don’t want to lose money over a decision because you didn’t understand the consequences.
4. How Can I Be Ready for Financial Emergencies?
Besides helping you strategize for goals like saving for your retirement, or starting a business, a financial advisor should also factor emergency expenses into your planning. They’ll study your situation and find ways to set aside money in case anything goes wrong in the future — like a pandemic that shuts businesses down.
5. How Much Do I Need in Investable Assets?
Many financial advisors will only start working with you if you’ve got some assets that you can use for investments. They might require amounts that reach hundreds of thousands of dollars, if not millions. If you’re still young and starting out on your financial journey or just don’t have that much cash to work with, get an advisor who charges an affordable rate.
6. What Services Do You Provide?
When asking questions for a financial advisor, you’ll want to inquire about exactly what kind of advising services they provide. There are many specializations, including investment management, retirement planning, tax management, and even succession planning. Check what they specialize in to see if it’s what you need financial advice on.
7. What Kind of Clients Do You Usually Advise?
Does the financial advisor work almost solely with rich clients? Do they usually advise entrepreneurs, professionals, people fresh out of college, or people close to retirement age? If most of the advisor’s clients have similar backgrounds to yours, they’ll likely be more experienced and knowledgeable on how to help you with your money problems.
8. How Do You Get in Touch with Clients?
Financial advisors can also have preferences on how they communicate with clients. For instance, some might be alright with spontaneous calls and messages, while others stick to monthly or quarterly meetings. It’s best to go for one that suits your calendar the most to avoid constant schedule conflicts.
9. Are There Any Trends That Could Affect My Finances?
A decent advisor keeps track of any changes in the market or law that could affect your financial plans. Staying up to date helps them make adjustments to your strategies so you can keep growing your nest egg. For example, if they’re anticipating a market downturn soon, they’ll search for other ways to diversify your investment portfolio and reduce the downturn’s impact when it happens.
10. Will You Be the Only One Working with Me?
Some financial advisors work in teams to help their clients. If you’re not comfortable having more than one advisor making plans with you, go for someone working solo. Otherwise, you’d have to check on who else is on the team and what their qualifications are. It’ll help ensure that you’re working with people you can trust.
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Derek Moneyberg is NOT a financial advisor, he is a wealth coach.
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