Hagemann Wealth Management

15 Questions to Ask a Financial Advisor

15 Questions to Ask a Financial Advisor

When you’re interviewing financial advisors (because it should be an interview process), you want to make sure that you find a financial advisor who will have your best interests at heart.  You want someone knowledgeable and experienced and one that takes the time get to know your financial situation and goals.  There’s a lot at stake here and so finding the right advisor can help improve your financial confidence and prevent headaches down the line.

  1. Are you a fiduciary?

The reason this question is so important is because a fiduciary must work in their client’s best interest BY LAW.  Financial advisors who are Non-fiduciaries may recommend products that are suitable however, they may not be in your best interest.  Always make sure to ask that question to make sure you’re working with an advisor who will be looking out for your best interests and not for a more self-serving relationship.

  • What are your qualifications?

Have you ever seen the list of initials behind a financial advisors name?  They can be quite confusing.  The Financial Industry Regulatory Authority has a professional designations database that you can use to check on what specific initials mean.

Additionally, you can use Form ADV to check out your financial advisor’s record.  This is the key disclosure document that investment advisors must file with the U.S. Securities and Exchange Commission (SEC).  Request your free copy on the Investment Adviser Public Disclosure website.

The most common credentials you’ll see include: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and Chartered Financial Consultant (ChFC).

  • How much experience do you have?

You want to know that your money and investments are in capable hands and so, your financial advisor should have adequate experience to guide you through an ever-changing economy (and market conditions!)

  • What are your fees?

There are a variety of fee structures that advisors can use.  However, the two most common are fee-only and fee-based.

  1. Fee-Only – Fee-only advisors are paid directly by the client in a transparent manner that doesn’t hide any compensation that they recover.
    1. Fee-Based – Fee-based advisors collect both a fee from their client as well as accepting commissions and compensations from recommended products and services.  While fee-based financial advisors can also be fiduciaries (meaning they have to have your best interest in mind by law), this does not prevent them from also accepting additional money for particular products or services they sell to you.
  2. What services are included in the fee?

Understanding what exactly you’re paying for can prevent headaches down the line.  Some advisors are only money managers who are focused solely on investments.  Other advisors may only focus on the financial planning side and not work with investments at all.  Wealth managers however, aggregate the two to support all of your financial needs.

  • What services do you provide clients?

This is actually a great question to ask as there may be more on offer than your aware of.  Remember, there are advisors that offer financial planning, others that offer investment management, and wealth managers who offer both.

  • How will we communicate about my investments?

As with all relationships, communication is important.  You want someone who will keep you updated and not just wait for you to call them.  How often you communicate with them will vary based on your own preferences, but you want to strike a balance that is comfortable for you.  This could mean a quarterly check in with an annual formal meeting.

  • What is your investment philosophy?

When it comes to managing your finances and investments, you want to know that you and your financial advisor are on the same page.  Your financial advisor should be equipped with a long-term investment strategy who will encourage you to invest consistently, regardless of market conditions.

The ideal financial advisor will take the time to get to know you and understand your financial situation and your goals in order to create a comprehensive plan.

And here’s the thing… if you’re not totally confident if what your financial advisor is doing, you’re less likely to stick with the plan.  Some things you’ll want to ask them about include:

  • Diversification
  • Growth v. Value
  • Types of Investments
  • Market Timing
  • How will you determine my asset allocation?

This goes to the heart of whether you’ll receive personalized attention.  If all of their clients hold the same allocation, or they don’t take the time to get to know your financial situation, you can bet this is not a personalized experience.  That’s more of a cookie cutter approach and cookie cutters should be left to the bakers.

  1. How will you measure and evaluate my investment performance?

What is the big picture?  A financial advisor should evaluate your portfolio performance in light of your long-term goals and your risk tolerance, coupled with current trends in the stock market.  You should make sure you find a financial advisor who sees the value in a diverse portfolio and will regularly rebalance your funds.

  1. Who is your custodian?

Many financial advisors use a third-party custodian to hold your assets.  This is very important as doing so provides a form of checks and balances to avoid any improper accounting.  This is a very important safety check that could prevent you from being the victim of a Ponzi scheme.

  1. Are there additional fees for financial planning?

Going back to how some advisors will offer financial planning while other may offer only investment management and wealth managers offer both.  There may end up being additional fees outside of what you’re paying for, so you’ll want to be prepared by asking this question.

  1. How often will my financial plan be updated?

There are some advisors out there who will craft your comprehensive financial plan and let it run without ever updating it.  Your goals, your lifestyle, your financial situation change and so too, should your financial plan.  Your financial advisor should conduct periodic reviews to ensure everything remains accurate and effective.

  1. What do you mean by financial services?

When someone asks, “what do you mean by financial services”, they may not be fully aware that the term financial services can range from banking to investing, insurance and financial planning.  When working with a wealth manager or financial advisor, this typically leans more towards investing, financial planning and insurance and not so much banking.

  1. What does an investment manager do?

An investment manager is a person or company that manages an investment portfolio on behalf of their client.  They help create strategies tailored to their customers goals and then use that to determine how to divide the client’s portfolio among different types of investments to help diversify their client’s portfolio.

Hagemann Wealth Management is an experience wealth management firm based out of Batavia, Illinois.  To schedule an interview with a financial advisor you can send us a secure message via our website or give us a call at: 630-326-9007.

Hagemann Wealth Management, where we start by listening. 

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