First date questions…for your financial advisor

When meeting a financial advisor for the first time, it helps to think of it as a date. Don’t just go with the first person you meet. Sure, you might have been assigned someone with your employer plan, but as with a blind date, there might not be the right chemistry. Remember, you’re the one who gets to decide whether it turns into a long-term relationship; you’re the one in control. Because it needs to be a good fit personally, it’s OK to “swipe left” and shop around.
At the prospect of a first date, it is now considered customary to scan your would-be lover’s social media accounts or enter their name in a quick Google search. A little research could save you from dull drinks with a stamp collector or an intense dinner with an extremist from the opposite end of the political spectrum. Why wouldn’t you apply the same online vigilance when deciding on a financial advisor?
You need to put in some legwork, doing research online. Remember how much is at stake: Your future. Don’t be seduced by a nice suit or fancy office, and don’t fall for impressive-sounding jargon. If an advisor isn’t speaking to you in plain English, it’s more a sign of their poor communication skills than of deep knowledge.
Before even reaching out and making a date, a few dealbreaker questions
First: Do they work for a company that is legitimate and client-focused? You can find out a lot from customer reviews and mentions of the company in the media. Checking if someone is a Certified Financial Planner should be easy, because they will put “CFP” after every mention of their name, on business cards, websites and email signatures. It would be conspicuous by its absence.
The next question is crucial, yet most people never think to ask it: How does that advisor get compensated? In other words, is the advisor acting solely in the client’s best interests, as a fiduciary, or are they working on commission?
Asking how a financial advisor is compensated is not a faux pas akin to asking a first date how much he’s compensated. It would be more awkward, in the long run, not to ask.
Though of course the vast majority of financial advisors are ethical and client-focused, those who work on commission have a strong incentive to persuade you to buy certain products or invest in particular funds. This has to compromise their impartiality to some degree. It’s essentially an alignment issue: You want to employ someone whose objectives truly align with yours.
Now it's their turn to ask the questions
Once you’re sure that they are qualified and that they will work in your best interests, you might feel confident to meet for a first date. Now it is their turn to be inquisitive. If their objectives are truly going to align with yours, they’ll need to know everything about you. They should take time to get to know you, asking questions not only about your retirement date, cash flow, and debt load, but also about your goals, dreams and fears.
When a client comes to me for advice for the first time because she’s suffered a loss, maybe with a parent leaving her an inheritance or the loss of a spouse leaving her bewildered, I’m always careful not to suggest any big financial decisions until she’s ready. A great advisor will be able to separate the emotional you from the regular you. That’s why it’s a good idea to establish the relationship now rather than waiting for some life event to bring you together.
To set you up with a financial plan that works best for your needs, an advisor needs to gauge your risk tolerance. The only way to figure that out is by having you fill out a questionnaire. A really good advisor doesn’t just hand you a pen and paper, they will actually go over the questions with you to find out more than a formal questionnaire can yield on its own. Otherwise, why not just use a robo advisor?
If you’re married or living with someone, your finances are intricately linked, and I would urge you both to find a time to visit an advisor together. You both need to be on the same page and build a plan together that includes your investments as a comprehensive part of the whole, with insurance products to protect you and your family.
Will they return your calls?
A good financial advisor will walk you through the necessary steps and explains things, giving you a clear idea of your options without ever resorting to jargon. The more information you get the better, so don’t be shy about asking questions. Advising you on what to do should always be accompanied with why you should do it. Ask for the rationale behind any piece of advice. After all, your financial future is on the line. Your advisor should explain investments to you in a way that you can understand, giving you the time you need to understand them. If you feel rushed in any way, maybe this isn’t a good fit. A good advisor will never pressure you into something that doesn’t feel right for you.
A financial advisor is supposed to help you look at the bigger picture, and talk to you not only about one specific area (say, your IRA strategy), but anticipate the upstream and downstream impact of your IRA contributions. What that means is, all the dots in your financial picture should be connected.
Communication is key, as in any relationship. How will your advisor keep you updated on any changes to your portfolio, market upsets, or any wider rule changes that may affect you? Will you be receiving regular emails and statements from your advisor about the performance of your investments? Are you able to reach your advisor by telephone? You want someone responsive, who will return your calls in a timely fashion.
Ultimately, you want to entrust your financial future to someone who genuinely has your best interests at heart, someone who understands not only your financial state but also your emotional state–your fears and anxieties. You want to partner with someone who can get to know you in all your messy complexity, in a way that no robo advisor or computer simulation ever could.
Will they return your calls?
A good financial advisor will walk you through the necessary steps and explains things, giving you a clear idea of your options without ever resorting to jargon. The more information you get the better, so don’t be shy about asking questions. Advising you on what to do should always be accompanied with why you should do it. Ask for the rationale behind any piece of advice. After all, your financial future is on the line. Your advisor should explain investments to you in a way that you can understand, giving you the time you need to understand them. If you feel rushed in any way, maybe this isn’t a good fit. A good advisor will never pressure you into something that doesn’t feel right for you.
A financial advisor is supposed to help you look at the bigger picture, and talk to you not only about one specific area (say, your IRA strategy), but anticipate the upstream and downstream impact of your IRA contributions. What that means is, all the dots in your financial picture should be connected.
Communication is key, as in any relationship. How will your advisor keep you updated on any changes to your portfolio, market upsets, or any wider rule changes that may affect you? Will you be receiving regular emails and statements from your advisor about the performance of your investments? Are you able to reach your advisor by telephone? You want someone responsive, who will return your calls in a timely fashion.
Ultimately, you want to entrust your financial future to someone who genuinely has your best interests at heart, someone who understands not only your financial state but also your emotional state–your fears and anxieties. You want to partner with someone who can get to know you in all your messy complexity, in a way that no robo advisor or computer simulation ever could.
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July 17, 2018
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