Finding a financial advisor is never easy. After all, it’s more than simply finding someone with proven skill and a reputation that is appealing to you. You have to find someone you can trust. Your financial advisor is going to be intimately aware of your finances and guiding you through several big decisions.
Whether you already have an advisor you trust, or are looking for one, these 5 must-ask questions will help you build a partnership with your advisor and maintain a positive relationship throughout.
Are you a fiduciary?
A fiduciary is simply someone who has to place their client’s interest ahead of their own. Fiduciaries also have to disclose what their fees are, how they are compensated as well as any other potential conflicts of interest that may influence their decisions. Non fiduciary financial advisors might receive a commission in exchange for selling you a particular investment that isn’t right for you, and not tell you how they profited from it.
How are you compensated?
If this information isn’t available on your advisor’s website, it’s important to ask in person. There may be an initial planning fee, as well as a percentage charged for assets under management. Some advisors may make money from selling you a particular product. Beyond finding out how much services will cost, this question will also help you determine if they have an incentive to sell you certain things.
What licenses, credentials and certifications do you have?
Certified financial planners (CFPs) are fiduciaries certified through a comprehensive ten-hour exam, and have multiple years of financial planning experience. A registered investment advisor (RIA) is a fiduciary who may be required to register with the Securities and Exchange Commission depending on how much money they manage. Asking your potential advisor about their certifications may be the difference between getting yourself a money manager or an advisor who will arrange a plan for you.
What types of clients do you specialize in?
Some financial advisors have a niche, or specialize in clients with a specific interest. Such as charitable giving or socially responsible investments. If you’re a newlywed or recently divorced, there are advisors who specialize in those areas too. Finding an advisor with whom you have things in common can often help build a successful relationship. An advisor who’s a similar age as you, or has business experience similar to yours can ensure that you’re always on a similar page when making decisions.
Ask to see a sample financial plan.
Financial plans don’t have a set structure. There is a wide variation in advisors’ approaches to plans, and asking to see a sample can help you understand that advisors workflow. Some advisors may give you 50+ pages with technical terms, charts and graphs, while others may simply offer a big-picture summation of your plan. Whether you want more information or less, it’s beneficial to see how an advisor works it out.
In addition to these questions, make sure to do lots of due diligence research on your own. Get recommendations from people you trust, particularly people with similar financial situations, needs, and outlooks are similar to yours. Make sure to Google them thoroughly, read through their LinkedIn and comb through their website. Goldstone’s website for instance, contains a breadth of information, including media materials and bios of our principle advisors. If your current or potential advisor’s info isn’t readily available on their website, you may want to ask why. We recommend you do the research.
Of course, these are only five suggested questions; don’t be afraid to ask as many as you need. The most important thing you can get from asking questions is peace of mind.