It is not uncommon to be nervous at your first meeting with a financial advisor. After all, finances can be a sensitive subject for many of us to talk about. You may be feeling overwhelmed. You may be concerned that you aren’t on track to fund your child’s college education or retire comfortably. The first step – reaching out to schedule a meeting – is often the hardest one.
A good financial advisor, however, will make that introductory meeting comfortable and informative. They will likely ask you many questions – about your income, savings, and debt; about your goals and dreams; about your individual level of risk tolerance. Keep in mind, though, that you are in the driver’s seat. This is a job interview, and you are the one who is hiring. You are allowed to ask as many questions of your potential financial advisor as you need to determine whether or not the advisor sitting in front of you is the one you want to trust with your fiscal planning.
Before you head to their office, make a list of questions you want to ask. That way you won’t forget to get those critical answers during the conversation. Not sure what to put on your list? We have you covered. Keep reading for some ideas of what to discuss and why.
Financial Planner or Investment Advisor?
In the broader scheme of financial services, you’ll encounter a variety of titles, credentials, and areas of focus. It’s worth it to take a moment to determine what kind of advisor you need, so you can evaluate whether or not the advisor you speak with can meet those needs.
They will typically fall under one of two umbrellas – financial planner or investment advisor. The latter will have a narrower focus, with a primary goal of managing and monitoring investments to build your wealth and grow your portfolio. A true financial planner will review every aspect of your relationship with money, which may include creating a budget, reviewing insurance coverage, retirement planning, and taking a look at estate planning strategies.
If your primary objective is wealth management, an investment advisor is probably who you’re looking for. If you feel like you need assistance in organizing, strategizing, and improving your financial picture in general, including preparing for retirement, a financial planner might be a better fit. Either way, be sure you understand what kind of advice and resources they are offering you.
What Is Your Area of Expertise?
While many financial planners are generalists who can serve the basic needs of a variety of clientele, others may have developed an area of focus and expertise with specific life stages or life events, niche markets, or certain types of products or services. Examples of this might be: divorce or business transition planning; families who are arranging for the care of parent/child/sibling who is disabled; college fund planning, or getting ready for a comfortable retirement.
If your situation aligns with one of these special categories, it may be wise to seek out a financial planner with experience in your area of need. If you need general assistance, find out first if the person you are talking to is a generalist, a specialist, or both. Their services may also vary by the type of client they are working with, so it is best to get a complete understanding of their scope of practice upfront.
What Are Your Credentials and Experience?
As we mentioned in the introduction, this meeting is basically a job interview. That means you can ask for the financial planner’s resume – their background, work history, and credentials or designations.
There can be a great deal of knowledge to be gained from someone who has years of experience in the financial services industry versus someone who just began practicing a few months ago. During your meeting, you can ask how long the advisor has been advising, what other firms they may have worked for, and what makes them the most qualified person to assist you. If you have specific needs, like planning for retirement, or investing in sustainable or ESG investment products, this is a great time to ask those questions.
You can also inquire about their title, licenses, and credentials. For an investment advisor, you may want to look for a Chartered Financial Analyst (CFA), which means they have been accredited by the CFA Institute.
Are You a Fiduciary?
This is one of the most important questions to ask because, in all likelihood, you will want to work with someone who is a fiduciary. By way of definition, a fiduciary is a financial advisor (or other professional) who is held to a standard in which they must act in their client’s best interest at all times, even if it is contrary to their best interests.
An advisor who is not a fiduciary may recommend products that are not the best fit for your needs because they get a commission. A fiduciary would not be able to do the same. They are required to suggest only the best available option for your unique situation. While most financial advisors would act with ethical standards regardless, as a consumer you’ll have more legal protections in place.
When you meet with a potential advisor, simply ask if they will be a fiduciary in the course of any work they perform on your behalf.
How Do You Get Paid?
It is natural to want to know how a financial advisor would be compensated for serving your needs – whether it’s managing your portfolio or coaching you through retirement planning. Your advisor probably makes their living via one of three common structures: fee-only, fee-based, or commission-based. Depending on your situation, one might be more practical than another. Let’s break those down.
Fee-Only: In this case, a financial advisor charges for their services and does not receive any commission on products they sell to you. They may charge an hourly rate, a flat fee for creating a plan or managing a portfolio, a retainer, or a percentage of the assets they manage on your behalf. Be sure to ask which so you can estimate the cost.
Fee-Based: A fee-based advisor will also earn income through fees paid by their clients, but they also have other means to make money. This may include commissions for insurance products, for acting as a broker-dealer, or for buying or selling securities. They can offer great convenience in the range of services they provide; it can also create a conflict of interest, so be clear on what advice and services your advisor will and won’t profit from.
Commission-Based: Just as it sounds, a commission-based advisor will earn their income by receiving a payment from the company whose financial product they sell. The benefit for you as the client is that you won’t be paying any fees out of pocket, but you may find yourself concerned about whether or not their recommendations are in your best interest. Have an open conversation about how a commission-based advisor separates their clients’ interests from their own.
Ready To Take The First Step In Preparing For Your Financial Future? Let’s Talk.
At Sustainable Retirement Income, we work hard to earn your trust and ensure your comfort during your first meeting with us and at every meeting thereafter. We’ll take the time to answer all the questions above along with any others you may have. Our core services include comprehensive planning, tailored solutions, best-in-class portfolio management, and premium service. Our clients’ needs and the solutions we provide encompass the entire financial services spectrum: growth of capital, capital preservation, income, college funding, retirement planning, estate planning, risk management, philanthropic giving, and more.
I would welcome the opportunity to be your trusted source for financial information and guidance. Let’s start a conversation!