Manisha’s MoneyZen Blog

5 Questions Every Financial Advisor Should Ask You

Photo credit: Louis Leray

Taking care of your financial health is a continuous process. Life changes at a rapid pace. It is essential to honor yourself by asking for help during major transitions. While 70% of women say they want to work with a financial advisor, only 20% actually do (source: Cerrulli Associates, hat tip to the delightful Brittney Castro, CFP for highlighting). Are you ready to take this step?

If you decide to seek out a financial advisor, listen carefully to what they say. Here are 5 questions I think an effective financial advisor should always ask you:

1) Do you understand and feel comfortable with the fees you will pay for my services? 
Red flag: if an advisor can’t make direct eye contact and speak calmly and clearly about their fee structure, beware. As a client, you have the right to fully understand the fee that the advisor earns for providing financial planning/investment management advice, as well as any other fees associated with the recommended products (such as management fees and loads). Transparency is the key.

2) What is your current household income, and do you expect that to change? 
Many advisors, myself included, get paid a percent of assets under management. So, there is a natural desire for an advisor speaking to a potential client to want to know how much they have in assets. But how those assets should be invested is very closely linked to the individual’s income stream. A tenured professor with a very steady and reliable income stream can take on more investment risk, all else equal, than a self-employed graphic designer who might have a very unpredictable earnings stream.

3) How would you like me to interact with you?
The financial services industry has a long history of focusing on quarterly communications—typically consisting of a “quarterly client letter” (which almost no one reads) and a multi-page analysis of your portfolio (with analytics very few people understand). If you are going to a financial advisor, make sure you work with someone who knows what is important to you, and who is communicating about your specific goals on the schedule you prefer.

4) Do you have any questions or concerns about the investments I’ve recommended?
Two standard tools that many advisors, including myself, use are the “risk profile analysis” and “investment policy statement.”  The former helps identify a client’s risk tolerance. The latter lays out a proposed plan of investment action. While these tools have very official sounding names and may feel set in stone, never forget that they are referring to your money. It is important that you feel comfortable with the investment plan that results from these steps. If the recommendation feels too aggressive – or too conservative – to you, it’s important to be able to share that with your advisor.

5) Is there anything you’d like to know about my professional qualifications or the way I handle my own personal finances? 
This is somewhat controversial – but I believe that if you are going to entrust your hard earned assets to someone else to manage, you have a right to know what qualifies that person to talk to you about money and to get a sense of how they have handled their own finances.

Working with a transparent, compassionate, qualified advisor is an essential way to take care of your financial health and create the life you desire. Managing your money doesn’t have to be difficult or overwhelming. When you collaborate with the right financial advisor for your needs, you free yourself to focus on what you value most in life.

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  7. MT, Great advice. I wish I had this 30 years ago. I made it through more or less intact with a brighter future than many. I forward your blog and comments to any who want to listen; we’re on the same page or book.

  8. B – Kudos to you for having navigated the rapids & thank you for sharing these nuggets with any others who may find them inspiring. While useful at any age, I’m extra eager to get the word out to folks who still have that most potent of all investment tools on their side… TIME :) M

  9. Great post. Here’s another question that deserves asking: “What’s important about money to you?” The husband will give one answer. The wife will give another answer. Rarely do they match. THIS one disconnect can create havoc for both the couple and the advisor. Getting clear on what’s important about money helps make everything else easier for everyone!

  10. Oooh – love that question, what a great way to literally & figuratively get to the heart of the matter!

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About Manisha’s Money Zen Blog

This blog chronicles my quest to identify simple, joyful methods that we can all use to feel calmer and more balanced in our relationship to our money.

Despite the abundance of personal finance books, magazines, radio programs and TV shows that have exploded into our lives over the past two decades, most of us struggle to find financial sanity, security and serenity. Rather than help us eliminate money pain, all this information has left us feeling overwhelmed and confused. We need fresh wisdom to break out of the cycle of despair and create lives of abundance.

Here’s hoping these short pieces will help you craft a uniquely rich and rewarding life.

To Your MoneyZen,
– Manisha