What kind of questions does a financial advisor ask?
You'll have in-depth conversations about your finances, short- and long-term goals, existing investments and tolerance for investing risk, among other topics. Your advisor will work with you to create a plan tailored to your needs: retirement planning, investment help, insurance coverage, etc.
- What to look for in a financial advisor.
- Find a real fiduciary.
- Check those credentials.
- Understand how the advisor gets paid.
- Look for fee-only advisors.
- Search for clarity.
- Find an advisor who keeps you on track.
- Questions to ask a financial advisor.
You'll have in-depth conversations about your finances, short- and long-term goals, existing investments and tolerance for investing risk, among other topics. Your advisor will work with you to create a plan tailored to your needs: retirement planning, investment help, insurance coverage, etc.
Before your first consultation, you'll want to reflect on and be prepared to discuss: Your values about money and your vision for your future. What life events are happening or could potentially happen. Short- and long-term life and financial goals.
An advisor can help you figure out your savings, how to build for retirement, help with estate planning, and others. If however you only need to discuss portfolio allocations, they can do that too (usually for a fee).
- Lack of Transparency Around Compensation & Conflicts of Interest.
- Only Focuses on Insurance or Annuity Solutions.
- Recurring Promotion and Usage of High-Commission Investment Products.
- They Don't Communicate Proactively.
- No Focus on Estate or Trust Planning.
- No Specialization.
Whomever you choose to work with may eventually want information on your income, investments, and other assets, as well as your current debts, insurance, and tax situation. This article will discuss all of the documents you might need. Still, perhaps more important than any documents are your goals and expectations.
It's important to reveal “personal issues, no matter how potentially embarrassing, if they concern money,” says John Stoj, a financial advisor at Verbatim Financial in Atlanta.
A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.
Source: 2021 Fidelity Investor Insights Study. Furthermore, industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.
How much money should you have before talking to a financial advisor?
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
It is risky to give your bank account login ID or password to a financial advisor or anybody else. Note that your advisor might be able to see your checking account and routing (ABA) numbers when you establish online transfers.
You should meet with your advisor at least once a year to reassess basics like budget, taxes and investment performance. This is the time to discuss whether you feel you are on the right track, and if there is something you could be doing better to increase your net worth in the coming 12 months.
“The certified financial planner designation is really the gold standard in the financial planning industry,” says Van Voorhis. A CFP designation indicates a financial advisor has passed rigorous industry exams covering real estate, investment, and insurance planning as well as has years of experience in their fields.
- Top financial advisor firms.
- Vanguard.
- Charles Schwab.
- Fidelity Investments.
- Facet.
- J.P. Morgan Private Client Advisor.
- Edward Jones.
- Alternative option: Robo-advisors.
- Your money mindset will impact how you handle money. When I interviewed personal finance expert Stacy Tisdale, she discussed money scripts. ...
- Automate your savings. ...
- Pay yourself first.
Red Flag #1: They're not a fiduciary.
In fact, only financial advisors that hold themselves to a fiduciary standard of care must legally put your interests ahead of theirs. Meanwhile, broker-dealers, banks, and insurance companies typically hold their financial advisors to a less stringent suitability standard.
They're unresponsive or take too long to reply. The financial advisor world is completely client-centric. You are the priority, you are the center of their universe. A common red flag is if an advisor sounds very client-centric and dedicated to you on the call… but then forgets about you afterward.
If you're young and have fairly straightforward financial goals, like saving for retirement and have a retirement plan through your employer, you might not need to work with a financial planner, Ayoola says. Maybe you don't want to actively invest and are looking for a lower-cost option.
Another request they have includes investment and bank statements. How extensive do we have to be in providing this? The documents you need to bring to the first meeting with a financial advisor are the ones you are comfortable bringing. But the advisor certainly isn't wrong to ask you to bring these documents either.
What should the advisor do first?
Well before the first meeting takes place, it's your job to do some research on the potential client. Find out what this person cares about most. What are they looking for in terms of financial and estate planning? Also, what are their hobbies, interests and dreams for the future?
Knowing about a client's family, professional, and personal life can help you pinpoint just where you can help. Do they own a business? Then maybe legacy planning or tax minimization is a conversation to have.
An advisor who believes in having a long-term relationship with you—and not merely a series of commission-generating transactions—can be considered trustworthy. Ask for referrals and then run a background check on the advisors that you narrow down such as from FINRA's free BrokerCheck service.
You should bring important financial documents to your first meeting such as bank statements, credit card bills, installment loan statements, pay stubs, or tax returns for the past several years. Bring any document that may have an impact on their financial situation.
"Certainly, it's important to have an advisor you can trust, but you still want to keep the relationship professional," Notchick adds. "When that relationship becomes more like a friendship, high fees almost always mean the investor will pay the price."
