When it comes to enlisting the services of a financial advisor, the process is a bit like dating. Just like you want to find a partner who shares your goals, communicates clearly and inspires trust, you want to find a financial pro who exhibits those qualities.
U.S. News asked financial planners which questions they wish their clients would ask them. Their responses are below.
[See: 8 Times to Talk to a Financial Advisor.]
“How do you get paid?” This question is absolutely essential for clients who are visiting a financial advisor for the first time. “It’s an important question because you want to know if you are paying hidden fees or commissions. For instance, a fee-based advisor will charge fees plus commission, whereas a fee-only advisor is paid only by the client,” says Stephanie Genkin, certified financial planner and founder of My Financial Planner LLC in Brooklyn.
The reason many people hesitate to ask this essential question is because it comes across as impolite. “Money is still a taboo topic generally, so people assume it is ‘rude’ to ask how (and how much) someone is going to be paid,” says Norman Boone, founder and president of Mosaic Financial Partners in San Francisco. Don’t let your nerves get in the way. Ask the question, and make sure you get a clear response in return. You’re going to pay for the services somehow — make sure the arrangement works in your best interest.
“What kinds of licenses and designations do you hold?” Asking this question can give you insight into whether a financial planner can meet your monetary needs. “Many ‘advisors’ are only licensed to sell limited investments and insurance and may not be able to suit your needs,” says Allan Katz, president of Comprehensive Wealth Management Group in Staten Island, New York. “Do they hold the CFP designation? Are they a fiduciary? Are they independent or an employee? Also be sure to look the advisor up on FINRA’s BrokerCheck.”
“Will you act as a fiduciary?” “Being a fiduciary means that the advisor puts the client’s interests first at all times,” says Patrick Stark, director of financial planning for RS Crum Inc, a fee-only financial planning and investment firm in Newport Beach, California. For example, if an advisor recommends an annuity, you need to know whether that annuity is the right financial tool for you, says Glenn J. Downing, certified financial planner at CameronDowning in Miami. An advisor who acts as a fiduciary commits to recommending products and strategies that are in your best interest, so you’d know that your advisor isn’t recommending that annuity simply because he or she needs that commission check to pay next month’s rent.
[See: Decode These 10 Vexing Financial Terms.]
“Do you take custody of or have access to my assets?” This question can root out potential Bernie Madoffs, whose access to your money makes it easier to mismanage, Stark says. Charles Schwab, TD Ameritrade and Fidelity are a few of the independent custodians that advisors typically use, he says. “One of my clients is trying to recover over $100,000 from a previous advisor who has custody of her assets and has now gone dark on her,” Stark says.
“How much contact do you have with clients?” Newbie clients will want to ensure they’re on the same page when it comes to the frequency of face-to-face meetings with their financial pro. “Some clients are fine with getting a quarterly email or getting a call once or twice a year, as long as they know that they can easily get in touch with their planner any time if and when they need them,” says Ryan Fuchs, certified financial planner at Ifrah Financial Services in Frisco, Texas. “Others prefer more hand-holding — for example, once-a-month calls from the planner, with a longer sit-down at least once a year, or something like that.”
“Do you have significant experience helping people with my same issues?” Find someone who works with clients with financial situations like yours. “If you have a complex tax situation, for example, you want to be working with someone who has experience,” Downing says. “If you have money to invest, you want an advisor who has worked through both up and protracted down markets.”
“What’s your investment philosophy?” Steer clear of financial advisors who say they can predict the future, Stark says. Instead, favor money pros who use low-cost passively managed mutual funds and preach diversity across asset classes. “Sure, it’s boring,” Stark says. “If you want excitement, go to Las Vegas.”
“How will I know how I am doing?” Find a financial advisor who can help you understand how you’re performing financially. It’s important for clients to see charts and tables that convey their assets’ performance metrics and how they relate to common benchmarks. “If advisors are not adapting and conveying this info to their clients, I view it as a disservice,” says Benjamin Muchler, a certified financial planner and managing director at Boston Research and Management Inc, a fee-only wealth management firm in Manchester, Massachusetts.
[See: 14 Important Personal Finance Dates to Mark on Your Calendar.]
“Why did you become a financial planner?” This quirky question may give you extra insight into your financial advisor’s personality and motivations. “You can easily distinguish someone with passion and care for clients from they way they answer this question,” says Hui-chin Chen, a certified financial planner and co-owner of Pavlov Financial Planning in Arlington, Virginia.
“What five important financial or investment books have you read and why?” “An advisor’s response to that question speaks volumes about both his [or] her continuing education as well as the likelihood of [his or her] ability to help educate clients about important financial matters,” says Bruce Colin, a certified financial planner and the principal of wealth management firm Bruce Colin & Co. in Rancho Palos Verdes, California.
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10 Questions Financial Planners Wish You’d Ask originally appeared on usnews.com
