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3 Questions to Ask When Hiring a Financial Advisor

So, you’ve decided to hire a financial advisor. Congratulations! Studies show a good financial advisor can increase investor returns by 3.75% annually.

3 Questions to Ask When Hiring a Financial Advisor

A financial advisor can bring knowledge and expertise to financial areas and help you create overall investment strategies. They can help reach your retirement goals, minimize taxes, and help structure your withdrawals in retirement. Financial advisors are also more versed in the long-game of investing and can help assuage any fears and help provide support by providing fact-based advice.

Bringing in a financial advisor in the early stages of your retirement planning can be very helpful for mapping the course for your future. Another benefit is in time, as you will not have to endure the learning curve of managing your portfolio along with many other financial nuances, instead of trusting the management to a professional. Financial advisors do cost money of course, and we recommend only using a fee-based advisor. Here are three questions to focus on when looking for a financial advisor.

Question 1: Are You a Fiduciary Advisor?

Nearly half of Americans erroneously believe that advisors are required to act in their clients' best wishes.[i] Unfortunately, not all financial advisors are created equal which is why it is important to do your research and ask the right questions.

A fiduciary is a person or legal entity that has the power to act for another, known as a beneficiary. A fiduciary is allowed to buy and sell securities on your behalf. A fiduciary is held to a high standard with the main job of acting in the beneficiary’s (client’s) best interest. This may mean recommending a product or service even if the financial advisor receives no compensation. A fiduciary advisor must act with loyalty and good faith, provide full disclosure, avoid conflicts of interest, and not use a client’s assets to benefit themselves or other clients.

An advisor who is not a fiduciary follows what is called suitability standards, within which they are required only to provide you with recommendations for investments or choices that are suitable to you, regardless of whether there is a conflict of interest or the size of the commission they receive is higher for one product versus another.[ii] Even if the non-fiduciary advisor is totally above board, it is hard to avoid potential conflicts of interest when their compensation structure rewards them for steering you to buy certain products over others.

You can see why it’s good to ask if the advisory is a fiduciary now, yes?

Question 2: What’s the Plan? (aka my long-term objectives)

The next question to ask is how the financial advisor can help you identify your goals and what the objectives are to achieve the long-term goals. If you are a younger person you may want to reduce or eliminate debt or student loans, while others may want to focus more on homeownership or college costs for their children, and still, other clients may be more retirement-focused. Whatever the goals, the financial advisor should provide a game plan and deliver it to you in clear terms.

With retirement specific plans, advisors should also be bringing up the emotional and lifestyle impacts of retirement, not only the financial. After all, knowing how you plan to retire and spend your days are important things to consider when determining your goals and budget for retirement. A financial advisor should be able to help you lay out a plan, with financial goals and priorities, and the steps to get there. A good financial planner should also recommend specialized help, like an estate attorney, CPA or trust, when needed.

Question 3: How Are You Compensated? (aka how much will I pay you?)

It’s an important question and one that scares people off from using financial advisors, even when they could really benefit from the services and know-how they provide.

Financial advisors are not just for high net worth individuals and can actually be even more valuable for typical families who worry they won’t have enough to cover everything at the end of the day. When only 17% of Americans use financial advisors and the majority of Americans manage their own retirement without a lot of financial knowledge, mistakes can happen and money can be lost.[iii]

Financial advisors charge differently, some charge an asset-under-management fee of 1 to 2%. Others charge commissions on the sale of investments or insurance products. Still, others charge an hourly fee or annual subscription. The extent of your portfolio, the complexity of your needs and the frequency of visits will also factor into the overall cost.

In the initial meeting, it is important to ask how often the advisor feels you will need to meet over the year. Many financial planners charge a flat $1000-3000 dollars for a full financial plan.[iv] This may sound like a lot, depending on your situation, but when you factor in that the average American spends around $1497 a month on nonessentials[v] like eating in restaurants, online shopping, and unused subscriptions, you might want to reconsider your sticker shock. Instead, you can reflect on the value of the confidence you’ll feel when your finances and long-term goals are in alignment.


[i] https://www.forbes.com/sites/janetnovack/2013/09/20/6-pointed-questions-to-ask-before-hiring-a-financial-advisor/#7b6a0f0a489f

[ii] https://money.usnews.com/investing/investing-101/articles/what-is-a-fiduciary-financial-advisor-a-guide-to-the-fiduciary-duty

[iii] https://www.cnbc.com/2019/04/01/when-it-comes-to-their-financial-future-most-americans-are-winging-it.html

[iv] https://www.moneyunder30.com/when-is-it-time-to-hire-a-financial-advisor

[v] https://www.swnsdigital.com/2019/05/americans-spend-at-least-18000-a-year-on-these-non-essential-costs/


Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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About the Author

Randall E. White, CFP®, RICP®, CRPC®, CMFC®

Randall E. White, CFP®, RICP®, CRPC®, CMFC®

Randy entered the financial services field in 1983 with Northwestern Bank which subsequently merged with First Union National Bank, and he later joined Wachovia Bank and Trust Co.

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Advisory Services are offered through TriCapital Wealth Management, Inc Securities offered through Triad Advisors member FINRA / SIPC. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors. We are licensed to sell Insurance Products in the following states: North Carolina, and South Carolina. We are registered to sell Securities in the following states: Delaware, District of Columbia, Florida, Georgia, North Carolina, Ohio, Pennsylvania, South Carolina, and Virginia.

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