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Questions to ask when choosing a financial advisor

What we'll cover

  • Qualifications to look for in an advisor

  • Questions you may need to answer

  • Topics covered during a planning meeting

Have you ever elbowed your cubemate, your brother or a friend and asked, "Hey, how do you choose a financial advisor?" or "What do you ask a financial advisor?" If so, here’s a great place to start. 

When you're planning to get guidance from a financial advisor, you want to make sure you're in good hands. Consider asking targeted questions that will determine whether you should select a particular advisor to steer your portfolio. Here are several questions you could ask when choosing an advisor. 

Good questions to ask a financial advisor

Before making any decisions, it may be good to meet virtually to determine whether the advisor’s personality complements yours. It could also be beneficial to have some questions written down so that you can guide the conversation and compare different answers. 

Here are some great questions to ask.

Are you a fiduciary?

This is one of the most important questions you can ask. Being a fiduciary simply means that a financial advisor is required by law to work in your best interest. Fiduciary financial advisors should always recommend products that fit your exact needs, while non-fiduciary financial advisors may recommend products that may benefit themselves more than you.

What are your credentials?

You want to make sure that your advisor has the accredited professional designations that fit your requirements. The Financial Industry Regulatory Authority ( FINRA ) lists professional designations on its website which will enable you to identify the various letters and initials after a professional's name. The site explains the prerequisites for various titles, training requirements, professional licenses, required exams and continuing education requirements.

Look for common, reputable titles, such as certified financial planner (CFP) and chartered financial analyst (CFA).

What services do you provide?

Financial planners should provide services based on your goals, possibly including services that range from investment management to tax planning and estate planning . If you're looking specifically for estate planning advice interview someone who has expertise in that area.

Ultimately, most advisors should be able to talk through difficult financial-related questions about debt management or retirement planning.

What is your fee structure?

When you're asking, "What is your fee structure?" you're also asking, "How do you get paid?"

You want to ensure that you're accessing a fee-only provider who doesn't receive commissions for selling products and not someone who will steer you toward a product you don’t want or need. Fee-only advisors charge a percentage of the assets you invest in or a flat or hourly fee.

How long have you been helping clients?

Is this individual experienced? The more experience a financial advisor has, the more likely you'll benefit from that person's well-rounded bank of knowledge and the more confident you will feel making your decision.

In addition to that, you'll get a sense of the financial advisor's credentials. For example, becoming a CFP requires a bachelor's degree from an accredited university (at the very least), and college coursework from a program registered with the CFP Board. In addition to that, CFPs need 6,000 hours of professional financial planning experience or 4,000 hours as an apprentice.

Who is your typical client?

A potential advisor cannot reveal the names of those whose money they manage. However, you can certainly ask about the individuals' assets, occupations and other characteristics to determine whether or not they match your particular profile.

How does the financial planning process work?

How does a financial planner work with you over time? How will they establish and define your relationship and collect and assess your financial status? What steps will they take to develop and implement financial planning recommendations so that you can review and reevaluate your goals, risk profile, lifestyle and other relevant changes? 

How often and how long will you meet with this individual each time? What will you discuss on an ongoing basis? Ask your potential advisor to walk you through how those meetings will look over the long term.

What will be covered during our personal financial planning meetings?

What you will each individual planning meeting entail? Your financial planner can’t help you pursue your retirement goals if they don’t know where the starting point is, or what challenges you face to get you to the finish line. They will need a recent snapshot of your finances and a monthly cash flow analysis (how much you spend each month and how much you save) to give them an accurate insight. By examining your spending behavior, an advisor may spend some time helping you  identify your goals .

You should hear questions like, "What are your objectives? What's most important to you over the next 5 to 10 years? What are your retirement plans?" Your advisor will need to know what you’re trying to accomplish and propose a plan to help you achieve your goals.

Next, your advisor might offer a written plan and monthly savings plan based on stocks, bonds, mutual funds, exchange-traded funds ( ETFs ) and more. These investments should match your goals, time horizon and risk tolerance.

How will you communicate with me, and how often?

How often should you expect to talk to your financial advisor? Some financial advisors may plan to speak with clients once a year unless specific circumstances require frequent meetings. However, others may arrange two meetings per year or want to meet with you quarterly. Make sure you're okay with the number of sessions that a particular advisor proposes before you move forward.

What resources will I have when working with you?

Financial advisors may also point you toward outside sources that can help you learn more about investing, such as monthly newsletters, online resources and additional resources. You'll also receive statements about your investment account performance and even online help to help you visualize the amount you have saved. 

What is your investment philosophy?

What are the beliefs that guide an advisor’s decision-making process? Finding out your financial advisor’s philosophy is a good idea, so you understand how they’ll cultivate your portfolio. If your investment philosophy is in balance with your advisor's values, they might be a good fit for you. 

What should you not tell a financial advisor?

When talking with your financial advisor, you should feel comfortable enough to be transparent about your financial situation. Keep your financial advisor apprised of family issues, undisclosed assets, health issues and anything relevant.

Wealth advising at Ally Invest

Being a hands-on, active investor allows you to redefine wealth management on your own terms and can help you to build generational wealth. By establishing conversations and asking questions, you can find the right advisor to offer you excellent advice at a reasonable cost.

Through a series of calls, you can expect exclusive tailored support from an experienced senior wealth advisor who will handle all aspects of your financial planning, meticulously craft a personalized investment portfolio while providing guidance and continuous monitoring to help you with your financial needs. 

So, take the next step and set up a consultation with an Ally Invest wealth advisor to map out your financial goals and kickstart your wealth building journey today. 

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