What to Ask a Financial Advisor
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- Are you a fiduciary advisor?
- What are your qualifications?
- How many years of experience do you have?
- Have you ever been subject to legal or disciplinary actions?
- How often will we review my investments?
- How do you get paid?
- When can I retire?
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A sunny beach in Costa Rica, a home in the Hamptons, or just living comfortably in your current house with no worries about money: It’s great to have future financial goals, but how will you achieve them? Unless you're one of the few who have a solid grasp on money matters and a long game toward retirement, it’s recommended to find a financial advisor.
And with around 13,000 registered investment advisors in the United States, there are more than just a few to choose from. How can you narrow it down to a financial advisor who has your interests at heart? Here are seven questions you can ask, with a little help from car insurancehttps://getjerry.com/car-insurance) broker and comparison app Jerry.
Are you a fiduciary advisor?
Want to know if the financial advisor is acting primarily in your best interests or for their firm? You’re looking for a financial advisor that has a fiduciary duty to you; an advisor who is legally bound to act in their clients’ interest ahead of their own.
Any investment advisors registered with the Securities Exchange Commission (SEC) are fiduciaries. Others such as stockbrokers, insurance agents, and broker-dealers, have looser requirements under the law.
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What are your qualifications?
To ensure you’re putting your hard-earned money in the hands of someone with the skills to make it grow, they should have minimum qualifications. First, a Bachelor’s degree in Business Administration from an accredited school should be mandatory. Both the Series 6 and Series 7 exams from the Financial Industry Regulatory Authority have to be passed, as well as North American Securities Administration Association tests.
To protect your investments, you may want to stay away from financial advisors who don’t have a certified financial advisor diploma or certificate.
How many years of experience do you have?
Although new financial advisors may be excellent at their chosen careers and can benefit from new clients, seasoned advisors are often a safer bet. They have the real-world knowledge and experience to avoid potential pitfalls and have the sense to know when an investment is prudent or foolhardy.
MORE: How to save money fast
Have you ever been subject to legal or disciplinary actions?
Of course, there are bound to be financial advisors who have gotten themselves into trouble. Those actions will likely bring closer scrutiny for future dealings. You may want to avoid using a financial advisor who has frequent legal or disciplinary actions against them. Ask them directly, but you can also check for disciplinary actions online at FINRA.org.
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How often will we review my investments?
How often you sit down with a financial planner or advisor is really a matter of personal preference. Ideally, it would be at least once per year to review your profile and decide if there are any changes you’d like to make. However, if you would like to meet more or less often (once a quarter, twice per year, or more frequently) you should be on the same page with your advisor.
Key Takeaway It's important to know how often your financial planner will take a look at your investments.
How do you get paid?
There are different pay structures possible for financial advisors. They can be commission-only, meaning they take a set percentage of the profits from your portfolio; fee-only, meaning you pay a flat fee, hourly fee, or a percentage of the asset they manage for you; or a blend of the two.
There can be a conflict of interest if the advisor is paid based on commission. To keep it simple and above-board, stick with a fee-only pay structure for your financial advisor.
When can I retire?
This is the one it all boils down to for most Americans. When will you have enough money set aside to live comfortably and achieve your dreams during retirement? A financial advisor will be able to give you a clearer picture of your financial future based on what you’re doing now, and they’ll make recommendations to maximize your investments to retire when you want.
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