- 3-Minute Article
- May 17, 2018
5 Questions to Ask a Financial Professional
Learning about a financial professional’s approach helps ensure you’ll find the right person for your needs.
Working with a financial advisor can help you develop a solid plan to achieve your goals. Americans who have received financial advice feel significantly more confident about their financial situation than those who have not (61% vs. 27%). They’re also more informed, calm, and optimistic than the unadvised.1
Because these relationships are so important, it’s crucial that you take your time to find the right fit for your needs. The first meeting with any potential financial partner is your chance to ask questions that will help you understand not just where their expertise lies, but what they will be like to work with over the years.
Here are five important questions to ask to help determine if a financial professional is a good long-term match:
Financial professionals come from a broad category of experts with different skills and capabilities. Some of the common designations you may encounter are:
- Certified Financial Planner (CFP): CFPs must have years of experience and pass a rigorous exam to achieve certification. By studying your income, taxes, debts, and investments, these advisors can give you a sense of your complete financial picture and help you work toward your financial goals.
- Registered Investment Advisor (RIA): RIAs can provide investment advice and manage your assets. As fiduciaries, RIAs are required to offer investment recommendations only with your best interest in mind. They typically charge a flat fee for their services.
- Brokers: These professionals are paid on commission to buy and sell securities for you. They are not held to the fiduciary standard required of RIAs; however, they can offer suggestions and guidance based on your financial needs.
Besides explaining their professional designation, potential partners should be able to clearly describe their areas of expertise and explain how they like to work with clients. You should also share your financial priorities to ensure there is alignment with their experience. For instance, if you want help planning for retirement, you might look for someone who has experience with holistic planning that can help you see how all your assets and investments work together.
Qualified professionals will clearly explain what they charge for their services and how those expenses are calculated. For example, you’ll want to know if they earn their money via:
- Flat rate: typically 1%–2% of the assets they manage for you.2
- Commissions: paid to them by the financial institutions whose products they sell. It can be difficult to know the exact amount, but they should be up front so you know if their recommendations are unbiased.2
- An hourly rate: average is $120–$300 per hour depending on location and experience.3
- A retainer fee: varies widely based on your net worth.
Open lines of communication with a financial advisor can help keep you on track toward your goals. Regular communication can take different forms:
- In person: You will want to meet face-to-face at least once a year. Annual meetings are the time for deep conversations about your goals, your progress, and any changes that need to be made to your financial plan.
- On the phone: Many financial advisors offer a quarterly phone call to keep you abreast of changes in the markets and how they might affect you.
- Via email: You may receive follow-up emails after meetings to address specific questions you’ve raised. Some financial advisors also send frequent communications, such as newsletters that recap current market trends or provide tips about important tasks like year-end tax planning.
Your financial professional should describe the process they use to review your financial information and determine whether any changes or updates are needed. For example, an advisor who manages your investment portfolio might describe how often and when they rebalance, or buy or sell assets, to maintain the mix of investments that best meets your needs. Spouses should attend review meetings together so that everyone is on the same page.
Knowing that there’s an established process for these regular reviews can help you feel confident that your financial partner is keeping track of your savings appropriately.
Ask if your financial advisor will delegate tasks to other members of a team — and how that approach will help you. In many cases, a financial office has other experts on staff that the team can tap for assistance, such as an accountant who specializes in taxes or an attorney who works on trusts or estates. There also may be junior associates who can assist your primary advisor, making sure your needs are met when there’s extra work to be done.
Questions like these can help you prepare for an open and honest conversation with any potential financial partner. By listening carefully to the answers you receive, you’ll be in a strong position to decide if you’ve found the right fit for the important work you’ll do together. Learn more about how to get the most out of your relationship.