10 Crucial Questions to Ask Your Financial Advisor

Planning for your future is one of the most important things you can do for yourself and your loved ones. You should first consider your lifestyle goals and priorities. These will help provide direction for your financial ambitions and will therefore allow you to plan your finances accordingly. There are a plethora of financial avenues you can take to achieve your goals, and each requires a sound understanding of the benefits, drawbacks, opportunities and inherent risks. We therefore recommend planning your financial future with the help of a professional, qualified and experienced financial advisor. Fortunately, there are a lot of financial experts who can help you, however selecting the best advisor can be difficult.

In our previous post, we shared the qualities you should look for in a financial advisor. This time, we’ll share some of the most important questions you should ask a financial advisor before making your next move.

#1. CAN YOU TELL ME ABOUT YOUR BACKGROUND?

To start off, ask about their professional background and their track record. What has their performance resulted in, over the past five years? What degree qualifications in business and finance do they have? What licenses and certifications do they have? Those who are Certified Financial Planners (CFP) and approved by the Financial Planning Association of Australia should make great candidates.

#2. WHAT IS YOUR INVESTMENT PHILOSPOHY?

Different professionals have their own investment approach. Ask the professional to describe and explain their investment approach and philosophy. Professionals should be able to explain everything to you in simple terms that you can easily understand. It is also important to note that you and each of the advisors clients have a unique situation which is a vital consideration when creating an investment strategy. Ensure they are willing to take the time to understand your current situation and financial goals, and define a customised strategy for you.

#3. HOW CAN YOU ENSURE THE PROTECTION OF MY ASSETS?

Perhaps one of the most important questions you can ask a financial advisor is how he or she can safeguard your money or assets. Among other things, you must be assured that your money will be safe. While there are always some risks involved, these should be outlined clearly and avoided where possible. In addition, ask the advisor if he or she operates as fiduciary. A fiduciary is a duty or obligation that a person must carry out as part of acting in another’s interests. A key element to ensuring your assets will be in good hands.

#4. HOW DO YOU ENGAGE & COMMUNICATE WITH CLIENTS?

You are likely to enter into a long term partnership with your financial advisor so making sure you will be well engaged in the process is critical. Communication is also an essential element in your relationship with an advisor. There must be regular and open communication between you and your expert of choice all throughout your financial journey. It is of high importance for you to be regularly updated with the latest market news and relevant to your investments. You may have concerns along the way and it is best that such concerns would be addressed immediately. Make sure that communication will be clear from the start.

#5. IS THERE ANYONE ELSE WHO WILL BE WORKING WITH ME?

Some advisors may work with clients alone and some may work with a team of other experts such as associates, solicitors, accountants and research analysts. If a professional team is working behind your financial plan, you should know who you will be working with. Always know who your direct contact is, so you know who to call if you have concerns. Otherwise consider the hassle if you get passed around when you need answers to certain questions.

#6. HOW ARE YOU COMPENSATED?

Advisors are paid differently for their services. Some work on a fee-based arrangement while some are commission-based. For fee-based professionals, they can be paid by the hour or per project. The payment can be monthly, quarterly or one-time only. Fee-based advisors do not earn from selling investments they are paid for the strategic advice they provide. On the other hand, commission-based advisors earn when financial products are purchased.

#7. WHAT IS YOUR FEE STRUCTURE?

When it comes to fees, transparency is of utmost importance. You would not want to end up paying for hidden fees. One of the initial things you should know about is their terms of payment or fee structure. The person you want to hire should be able to explain their fee structure clearly so you, the client, can fully understand what you are paying them for. There should always be full transparency of all fees.

#8. WHO WILL BE MANAGING MY INVESTMENTS?

Your financial advisor may guide you throughout the entire process but somebody else – a professional fund manager of example - may be managing your funds or investments. It is important to know who will actually be managing your money and what their investment style and mandates are.

#9. ARE YOU LEGALLY BOUND TO WORK IN MY BEST INTEREST?

The answer to this question should always be yes. Additionally, you should not just settle for a verbal yes. Make sure to get this in writing as this is an established legal principle and a fiduciary duty. Knowing what is at stake, it is only right for you to have somebody who is bound by the law to act in your best interest.

#10. CAN I GET IN TOUCH WITH YOUR PREVIOUS/CURRENT CLIENTS?

Current or previous clients are a great source of information if you want to find out more about a financial advisor. With firsthand experience working with the professional, other clients will be able to provide you with helpful information. This may include their performance, work ethic, behaviour and overall satisfaction levels. If the financial advisor has done an excellent job, and assuming these clients have approved, then giving contact information for references should not be a problem.

When searching for financial advice services, it is best to ask the right questions to help set expectations from the start. How these questions are answered can help you come up with an informed decision.

If you are in need of professional financial services, feel free to contact us at Warringal Financial Services. We have a team of qualified professionals who can provide the services you need. We will be glad to address any question you may have. Contact us today.