Do you find the topic of investing intimidating? When friends start talking about their investment portfolio, do you excuse yourself because you don’t think you have anything to add to the conversation? Do you avoid your financial advisor’s call for your annual review because you really don’t understand what they are telling you? And do you feel like you don’t even know what questions to ask?
You are not alone. Make this year, 2025, the year to learn more about your financial future and how you are invested. Learn how your investments affect your short- and long-term goals. Here are some topics or questions to present to your financial advisor the next time you meet.
- What am I invested in? Do I own stocks, bonds, money market funds? Do I own international funds? Do I own a combination of all?
- What are “sectors” and how do I Iearn what sectors I am exposed to? (FYI - examples of sectors are Technology, Energy, Real Estate, Healthcare)
- How do I determine what level of risk I am comfortable with? There are technical ways to analyze your risk tolerance, but there are also emotional/behavioral ways to determine how much risk and volatility you are willing to take on.
- How do changes to my investments affect my taxes? Depending on the type of account, buying and selling within the account can cause ‘realized gains’ that could potentially lead to a tax bill in the year the changes are made. Other types of accounts are tax deferred, so changes don’t create a taxable event. Make sure your advisor is explaining this to you when they are making a recommendation.
- What is the definition of ‘total return’ and what does that really mean? There are several ways to make money in your portfolio. Make sure your advisor explain how your specific accounts are allocated.
- What are the fees that I am paying? Some advisors will charge commissions, while others a flat annual fee to provide oversight and manage the account. Note that if you are more of a do-it-yourselfer and chose not to work with an advisor, you are probably still paying fees on some level. Make sure to know what those fees are.
- Am I saving enough to meet my goals, such as college for my kids or my own retirement? Not only am I saving enough, but am I saving into the right types of accounts and investments?
- Are there limits to what amount I can invest? Most retirement plans, whether with your employer or IRA’s that you invest in independent of your employment, will have contribution limits and they all vary.
On a more universal level, here are a few questions to ask your advisor to better understand their business model:
- How often should I meet with my advisor? Advisors should really be meeting with their clients a minimum of once per year, but this needs to be customized for each client.
- Ask your advisor if they are held to the fiduciary standard. This means that the advisor puts their clients’ best interests ahead of their own and makes suitable recommendations.
- Ask your advisor what experience and education they have pursued – are there any designations they hold? How does your advisor keep up with laws, changes and trends in the industry?
- How do my investment accounts transfer to my beneficiaries should something happen to me? This leads into a conversation about estate planning, but it is important to have each of your investment accounts registered correctly for ease of distribution to your heirs.
It is important for me to add here, that as a financial advisor, I completely welcome and actually encourage my clients to ask these questions. This open communication makes for a team approach to investment decisions and allows us to be on the same page while working toward a client’s financial goals.
The moral of the story here - there is no ‘dumb’ question when it comes to investing and financial management. Rely on your advisor and ask the questions.
My team at Compass Financial is passionate about educating our clients starting with the basics and going as deep as each individual desires. Our mantra is ‘if our clients leave our office after every visit with just one more nugget of understanding than when they arrived, we are doing our job’.
Important Disclosures
Investing includes risks, including fluctuating prices and loss of principal.
Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries, and companies.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation do not protect against market risk.