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Questions to Ask Your Financial Advisor

Pursuing the guidance of a financial advisor can help with various life circumstances. They prove vital when preparing for long-term retirement planning, annual and multi-year income tax planning, reviewing personal budgeting, or crafting a charitable giving strategy. However, finding the right advisor for you may be challenging.

questions to ask your financial advisor

How do you know if you are working with the best professional to help reach your financial goals? We seek to guide your process by outlining a series of important questions to bring into every financial advisor interview.

Are you a fiduciary?

At DHJJ Financial Advisors, the answer is yes. However, not all financial advisors are fiduciaries. It is important to understand the difference. The common analogy used to explain the difference between a fiduciary advisory and a nonfiduciary advisor is this: if you are buying a new outfit, a non-fiduciary advisory has the responsibility to make sure the clothes simply “fit,” whereas the fiduciary advisory has the responsibility to make sure the clothes “fit” and also that they look good. In short, a financial advisor who is a fiduciary is legally required to make recommendations based on your best interest.

Non-fiduciary advisors may seem pleasant and trustworthy during your initial business transactions. Unfortunately, they can later make “suitable” recommendations, putting their interests before yours during a conflict of interest. An example of conflict may include receiving a commission from selling or trading specific insurance plans or assets.

Therefore, ask if the financial advisor abides by fiduciary requirements. The answer may provide insight into the quality of advice received. Working with a financial advisor compliant with fiduciary conduct eradicates conflicting interests and affords you peace of mind. Legally, your best interest will always come first.

How do you get paid?

Pay structure provides valuable insight into how the advisor is receiving compensation and if they have any vested financial interest in how they are investing your money. As aforementioned, conflicts of interest can muddy the quality of advice received. Thus, it may be in your best interest to seek out an advisor that does not get compensated by the funds they invest your money into, but rather has financial independence from the products they invest in.

The specific fee structure may look different, depending on your advisor of choice. Some require a percentage of assets managed, while others may charge an hourly fee. Forbes suggests:

Work with investment advisors who receive 100% of their compensation from invoices they send to their clients. It is much easier to determine what you are paying for their services and it eliminates all conflicts of interest.

What is your investment philosophy, experience, and communication preference?

Investment philosophy, previous experience, and communication preference are three important questions that ultimately instill trust while working together.

Working with a financial advisor with a similar investment philosophy as yours can be critical for accomplishing goals. Do you fully understand and agree with this advisor’s investment management strategy? Do you believe in the philosophy and financial advice this advisor shares? Perhaps the strategy sounds good, but the process is hard to understand.

Trusting your advisor during difficult market conditions is challenging when worrying about what is happening with your money. Four key terms to keep in mind while the advisor is explaining his or her investment philosophy include:

  • Diversification: Some advisors tend to diversify investments in a wide array of stocks and bonds. However, others invest in large, U.S.-based companies only. Most professional investment advisors conclude that a diversified portfolio is key to success.
  • Growth vs. Value: Advisors may prioritize growth over value stocks. Others utilize both styles.
  • Types of Investments: Advisors invest in a variety of investments, each often offering a level of diversification. Investment types include mutual funds, annuities, index positions, etc.
  • Market Timing: Some investment advisors try to time the markets. If the advisor wraps market timing into his or her investment philosophy, be aware that misjudging the markets can prove costly.

Secondly, ask if this advisor is accustomed to working with clients in situations like yours. Do you resemble the advisor’s current clientele? Of course, your advisor will only be able to answer this question one he or she learns about you. A trustworthy advisor will spend time understanding your holistic financial situation and goals before offering investment advice.

Finally, understand this advisor’s communication preferences and voice yours. Is the advisor prepared to reach out once a quarter to check in and plan throughout the year with a formal, yearly check-in? Is the advisor comfortable with you reaching out with questions? Will the advisor proactively communicate with you with investment updates or portfolio changes?

Narrow down further to a method of communication. Does your advisor prefer calling or emailing – and does this sit well with you?

If you and your advisor are on the same page regarding strategy, experience, and communication tactics, you are prepared for success.

What are your professional qualifications?

You are probably familiar with the list of initials behind a financial advisor’s name. A few of the most popular qualifications include:

CPA: Certified Public Accountant (this is not an investment certification)

CFP: Certified Financial Planner

RIA: Registered Investment Advisor

Advisory certifications such as these are good indicators of experience. Therefore, always choose a qualified, professional financial advisor. As a credentialed advisor, they will have the necessary expertise and experience to properly handle investments and financial planning.

The Financial Industry Regulatory Authority lists all professional designations within a database for further inquiry. Each qualification includes details regarding educational requirements, verification, and accreditation. If you are unsure of an advisor’s listed specialties, the designations database is a helpful resource.

How many years have you been an advisor? What is your degree in?

Do not be afraid to inquire about years of experience. It’s helpful to know if your advisor is familiar with bull and bear markets and professionally navigates uncertainty with expertise.

Therefore, ask about their educational background. Many financial advisors do not possess degrees in finance, investments, or economics, simply because many advisor jobs resemble sales positions. Does this advisor have a relevant degree? This qualification is important for your investments.

DHJJ Financial: Trusted Advisors

At DHJJ Financial, our team of qualified financial advisors puts the client first.

Through our financial planning process, questions, information, and analysis are considered as they impact a client’s financial situation. Our team of qualified advisors addresses any or all the following areas:

  • Personal Finance
  • Retirement Planning
  • Estate Planning
  • Insurance Planning
  • Income Tax Planning
  • Roth IRA Conversion
  • Charitable Giving
  • Divorce Financial Planning

Regardless of your financial needs, you can trust that our team has the experience and expertise to lead you with confidence and a well-thought-out financial strategy.

Our financial asset management process is comprehensive. We enable our clients to better understand the management of their assets, promoting open communication and proactive engagement.

To receive more information about our services, please contact DHJJ Financial Advisors at 630.420.1360 or via our online contact form!