A common misunderstanding in the world of finance is that you must have a high net worth or a lot of money to benefit from talking to a financial professional. This is not the truth. Financial issues and concerns come in all different shapes and sizes.
There are financial issues that create stress, anxiety and angst. There are also money situations that are positive, those that also require a level of attention and professional advice.
Financial professionals come in all different forms as well. It can be confusing however, knowing how to choose the right person or firm.
You need to start by asking yourself if you need a product as a solution to your situation, or do you need a relationship, a more holistic analysis to address some of your concerns.
Here are some questions to ask financial professionals as you conduct interviews and consider possible individuals/firms:
- Can you help me understand the difference between a Financial Advisor and a Financial Planner? An Advisor is more involved with money and investments. A Planner will have more of a big picture, holistic approach – cash flow, budgeting, college savings, retirement, tax and estate planning.
- What does the term ‘independent’ mean in relation to financial professionals? Independent financial professionals have the opportunity to make recommendations with no tie to any proprietary products; nor are they incentivized to sell a certain security or investment vehicle. They can essentially shop the entire universe of financial products or solutions for your specific situation.
- Are you a fiduciary? The definition of a ‘Fiduciary’ is acting in the clients’ best interest over your own. Another great definition is - a fiduciary accepts legal responsibility for duties of care, loyalty, good faith, confidentiality, and more when serving the best interests of a client. When acting in an advisory capacity providing financial planning or asset management, we are investment fiduciaries.
- How much experience do you have? What are your credentials? There are many designations and licenses financial professionals can achieve, which translates to commitment and dedication to mastering the profession of giving financial advice. The mere fact that a professional has a specific designation does not eliminate the need to make sure there is a level of trust and professionalism you feel with your advisor.
- What services do you offer and do you have client minimums? Do you specialize or limit your firm to certain types of clients? Depending on the advisor, there is a wide range of services they can offer (planning, investments management, insurance solutions, etc.) Make sure to understand the entire scope of the engagement and what services are offered. Some advising firms require a minimum investment or minimum net worth to establish a relationship.
- How do I pay for your services? There’s a variety of ways advisors can charge clients. Decide which payment methods work for you, then find an advisor who uses that strategy. Will you pay an advisor through a commission agreement, a percentage of assets, a flat fee or an hourly rate.
- How often will we meet? Will we meet annually or as often I feel necessary? If changes need to be made to my portfolio, how will you reach out to me? Every firm is different, but the mainstream firms will meet annually at a minimum and more often as life events dictate.
- Will you coordinate your advice with my other professionals (tax planner, estate planning attorney, insurance partners?). Many holistic financial planners will act as the “quarterback” and involve other professionals in strategy sessions to pursue a client’s objectives and goals.
Many financial firms offer complimentary initial consultation to start the conversation. Much like an interview, this gives you as the client an opportunity to ask these types of questions and determine what advisor may be best for you and your situation.