Asking a financial advisor the right questions at the first meeting will allow you to make the right decisions.
Before hiring a financial advisor to help you with your financial goals (e.g, pay off your mortgage or save for retirement), you will want to know if they have the right experience, qualifications, and how much their advice will cost you.
Therefore, it makes financial sense to do your homework. It also makes sense to prepare a list of questions to ask a financial advisor before hiring him or her.
Doing so will help you determine if the financial advisor is the right fit for your needs and situations.
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Check out now: 5 Mistakes People Make When Hiring A Financial Advisor.
Here Are 5 Key Questions to Ask A Financial Advisor at the first meeting:
What are your qualifications?
One of the most important questions to ask a financial advisor is their qualification. You definitely want to know that, because everyone can call themselves a financial advisor.
Indeed, a well-qualified financial advisor should be a certified financial planner (CFP). CFPs agree to adhere to the CFP Board’s code of professional conduct.
Therefore, they must disclose information about their background including any disciplinary actions against them like crimes, or bankruptcies.
Knowing that your financial advisor is indeed licensed to give you advice can put your mind at ease knowing that at the very least, you’re dealing with a professional.
To become a certified planner, one have to have a bachelors degree from an accredited college or university.
They must also complete continuing education, usually 30 hours every 2 years. They must pass the CFP examination.
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How Long Did it Take You to Get Them?
You should ask the financial advisor about the subjects they studied in undergrad and grad school. You should also ask the length of the courses.
Any courses in economics, finance, accounting, or financial planning are desirable.
It’s also important to know the length of the courses they have done. The longer the courses, the more comprehensive the contents are.
How Do You Keep Up With Changes In The Industry?
A serious financial advisor should undergo ongoing professional development to keep up to date with current changes in the industry that might affect their clients.
So you should ask whether they regularly attend seminars, conferences, training activities in their industries.
What are your experience?
Perhaps one of the best questions to ask a financial advisor is their experience. Indeed, a good financial advisor is someone who is very experienced.
After all, you’re trusting someone with your money, so you would want to make sure they have the right experience.
Whether it’s retirement planning, investing or estate planning, it’s comforting to know that they have the experience giving financial advice to people who have similar issues to you.
A good way to know if they have the right experience is to ask them about their typical clients. Were his clients seeking retirement planning advice or investing advice?
>>MORE: 5 Signs You Need A Financial Advisor
This is crucial, because if you need help with retirement planning, you really don’t want a financial advisor whose past or current clients have always been seeking estate planning advice. So ask for a list of the types of clients the financial advisor handles.
Also, ask how long they have been working as an advisor. This is important if you’re looking for complicated financial advice.
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How do financial advisors get paid?
At the end of your first meeting with a financial advisor, you should have a clear idea of what their fee structure is. In other words, how much their service will cost you.
It’s important because fees and commissions for the advice vary depending of the complexity of the advice. So asking them how do they get paid is an important question for a couple reasons.
First, asking so is crucial because you don’t want to end up paying any hidden fees. For example, mutual funds or investing in stocks, in general, involves some type of brokers’ fees.
And these fees can eat away any potential returns. Second, knowing what a financial advisor charges for his or her services allows you to know whether or not you can afford their services.
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What are your fee structure?
Financial advisors can charge you for their services in 3 ways: 1) on a fee-only basis, 2) on a commission basis and 3) on a fee basis. Each fee structure has their pros and cons. Again, it’s up to you to decide which one works best for you.
For example, on a fee-only basis, the financial advisor will get paid hourly and will also get compensated based on a percentage of your assets under his or her management. It can range 0.5 to 2 percent per year.
This fee structure can be expensive, especially if you don’t do a lot of buying and selling of your investments.
However, with this fee structure, you can better estimate how much you will pay your financial advisor.
With a commission based fee structure, the financial advisor get paid when you complete a financial transactions such as buying and selling stocks.
The good thing about this fee structure is that it can cost you less if you don’t do a lot of buying and selling.
With a fee based structure, the financial advisor charges you a fee for his or her advice. They can also make a commission for a certain product they sell you.
The bottom line is you have to ask a lot of questions before you meet with a financial advisor so you can get the right advice for your situations.
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Tips on Choosing Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.