20 Questions for your Financial Adviser

20 Questions You Must Ask Your Financial Adviser

If you have a financial adviser, or are in the process of selecting one, ask these questions to be sure you’re getting all the information you need to determine if that adviser is a good fit for you. Remember, not everyone has your best interest at heart. It’s up to you to make informed decisions about who is going to guide you in the management of your money and assets. You have to ask the right questions or you may not get the important information you need.
If you don’t have an adviser, I would urge you to get one. There are simply too many new products and ideas to keep up with. A good adviser will be on top of the market, market alternatives and new approaches that can best serve your needs. While selecting your adviser may take a little work, the payoff should be well worth the effort.

1. What makes you different from other advisers?
Since many advisers offer the same products, most advisers will tell you that they are different because they offer high quality personal service. While this is important and may also be true, you should still carefully consider the adviser’s philosophy of creating a plan, investing, product specification, etc. Remember, at the end of the day, selecting an adviser is not just a personality contest but also an important business decision about your hard earned assets. The people who help you with your money should be worthy of handling it and be able to relate to your specific wants and needs.

2. Are you an independent adviser or do you work for a company as a captured agent?
Be wary of advisers who are associated with or employed by one company and who only recommend that company’s products. These products may or may not be the best product for you. Sometimes, if you know what you want, it is good to work with a specialist who represents only one type of product i.e. bonds or annuities. Still, think twice if that person only represents one company and feels that that company’s products are always the best for you. An independent adviser works with multiple companies and can find the best product amongst the many companies he or she represents.

3. What kind of clients are a good fit for you?
Good advisers are selective about the people that they want to work with and have clearly defined who those people are. For example, some advisers require that they make all investment decisions without your input. Others might want to work with people who are more socially conscious. For some advisers, it’s all about the money and they don’t really relate with how money affects other things in your life. And for others, they take a more holistic approach and want to work with people that think in a more holistic way. When you are working with or interviewing an adviser ask yourself, ‘Are we on the same page in the way we think about money and life?’ If so, that may be the adviser for you.

4. What percentage of your business are people like me, in my situation?
Find out what types of people the adviser usually works with. If you are retired, for example, perhaps you would have more confidence in an adviser who specializes in retirement. If you are younger, maybe you would prefer an adviser that works with younger people. Advisers are much like doctors. You wouldn’t go to a knee surgeon to have your heart repaired. Think about your adviser the same way.

5. What products do you sell the most?
Every adviser leans to one product or another. Find out from the adviser you are talking to what that is. For example, maybe the adviser likes to use bonds. That’s OK, but bonds may not be for you. Another adviser may use annuities a lot. That’s OK too, but what if you’re the kind of person that doesn’t like annuities? There are no rights or wrongs here, just good data so that you know what to expect and what your adviser will probably recommend for you.

6. Are the products you sell the most from just one company?
Does the adviser, even if he or she is an independent adviser, primarily use the products of one company? If he does, find out why. Maybe those are the products he knows best. Perhaps those products have higher commissions. Or maybe the adviser works for the company whose products he or she is recommending. Remember, many advisers will tell you that they represent many companies, but will still have their favorites and biases. You need to know if those biases are right for you.

7. How do I know you’re not just selling me high commission products?
Ask the adviser how much he or she is making on the products that are being offered to you. If its management fees, are they published? If it’s trading fees, are there discounts? If it’s insurance or annuities, just ask how much they are making –what is the commission that they are going to earn on that product? See if they give you an honest, open answer. Many advisers, for some reason, don’t want you to know what they are making. Remember, at the end of the day, it is you who is paying, either up front or behind the scenes. So, you have a right to know.

8. Do I always meet with you or do you send me off to an assistant once I’m a client?
In the name of efficiency many advisers will spend a lot of time with you when they are trying to get your business and then, once the sale is made, disappear and move you off to an assistant. Find out what the adviser you are interviewing does. Sometimes it’s OK to work with an assistant, especially if it’s just paperwork or data gathering. Too often, however, the assistant tends to become a total replacement of the adviser, leaving you behind. Find out how your adviser will work and make sure you feel comfortable with his style.

9. Can you rank my portfolio against the S&P Index for growth and risk?
Most advisers want to talk a lot about how your money will grow, and very little about how much you could potentially lose. Don’t get caught in that trap. While it’s great to talk about making money, there is always the danger of losing money. Make sure you know the potential downside losses of your portfolio. Ask your adviser to compare the growth and risk of your portfolio with a standard like the S&P 500’s growth and risk. He should put that on a chart for you so you can see historically if you are taking the appropriate amount of risk for the growth you are getting.

10. What is your theory of asset allocation?
There are two general types of asset allocation. The first is the number of different types of positions you own (i.e. individual stocks). The second is the number of different types of products you own. If your portfolio is exclusively mutual funds, you many own many different stocks through the mutual funds, but you only own one type of product, mutual funds. There are many other types of products and a well allocated portfolio will include more than one type of product.

11. How long have you been in business?
The best thing an adviser can offer you is his or her experience. Advisers that are new to the field may have only worked in an up market and not been tested in a down market. Some new advisers may only understand a few different product types i.e. annuities, and recommend what they know best as a ‘fix it’ for everything, rather than what is good for you. It’s not that newer advisers can’t do a good job for you, but experience is definitely a plus. Work with a more experienced adviser unless you are quite confident that the newer adviser is knowledgeable and competent.

12. How long have you been with the same company?
Advisers that jump from company to company may not give you the feeling of stability and trust that you would like to have. If you are working with someone who changes companies often it’s better to know that up front rather then getting a stream of announcements in the mail that your adviser has moved once again.

13. Are you an active money manager or a passive money manager?
If you’re looking to buy stocks or mutual funds, this is important. Active money managers try to pick stocks, bonds etc. that they feel will beat the market. Passive money managers believe that you cannot consistently beat the market by picking stocks and buy indexes or a majority of the stocks in a market sector or class. These types of advisers are called passive money managers and are concerned only with market classes, not with how each individual stock within the class will perform. This can get very complicated but you should know on which side of the fence your adviser is and if that is the side you prefer.

14. Why do you believe you can pick stocks or mutual funds that can consistently beat the market?
If you’re looking to invest in the market and the adviser is an active money manager, or someone who uses a lot of mutual funds (who most often are also active money manager), find out why he or she is so confident that they can consistently pick winners in the market. If the adviser tries to convince you based on past results be very wary. Most mutual funds that are ranked #1 one year are ranked far lower the next. The same is true of individual stocks and individual stock classifications.

15. What percentage do you think my portfolio could lose if we had another crash like in 2000 –2001?
The adviser should be able to answer this question in specifics i.e. if you had this type of portfolio in the year 2000 it may have lost as much as 40%. If he can’t or won’t, it might be time for you to move on. Knowing your downside risk and exposure to loss is very important and should be discussed.

16. How do you get my financial plan to get me where I want to go –to integrate with the things in my life that are more important than money?
Your money is just fuel for the journey to reach your goals, hopes and dreams. If you worry about money, ask the adviser how he is going to deal with your worry, not just the money. If you want to purchase a second home, that should be a primary consideration in picking your portfolio allocation. Make sure your adviser can see beyond the money into your material and emotional needs and make your money work for you in the full scope of your life.

17. What process do you use to determine if we are a good fit or not?
Get agreement when you are interviewing advisers as to how they plan to work with you. How many meetings; what will you get at each meeting; when and what decisions do they expect; what happens if you say ‘no’, how will they handle that; how will they help you get through your decision process? Understand what your adviser expects so that you don’t feel pressured or get blind sided during the planning process.

18. How do you decide whether I need an aggressive or conservative portfolio?
Advisers are required to determine your risk tolerance and choose products accordingly. Yet, this is not enough. The adviser must also determine what growth rate you need, and this may not be the growth rate that you expect to get or are wishing for. It’s one thing, for example, for an adviser to tell you that you should get 10% -12% return in the market. It’s quite another thing when the adviser tells you that you must have 10% -12% return to, let’s say, not run out of income. You may be taking more risk than you need to take by aiming for a return far higher than you need to make. Get your adviser to talk about your needs, not your wants.

19. If you had to pick one weakness you have as an adviser what would that be?
Getting the adviser to talk about his or her weaknesses will reveal a lot about who the adviser ‘really’ is. Nobody is perfect. Everyone is better at some things and not so good at others. If your adviser thinks he or she is perfect, you probably should go somewhere else. Sooner or later your advisers imperfection will show up. Maybe he doesn’t return calls as quickly as he should; is weak on follow through of servicing projects; gets too excited about up markets. Find out ahead of time and you won’t be disappointed or surprised later.

20. What would you say is your major strength as an adviser?
Here’s your advisers chance to toot his or her horn. Just sit back and listen and see if you like what is said. Does it appeal to you or not? Do you and the adviser share the same focus? Is the adviser’s strength a strength you would like on your team? If the adviser goes on and on about himself and doesn’t relate what he can do to your particular situation, you might want to reconsider whether he or she is a good fit for you.

If you are looking for an adviser, are unhappy with your current adviser, or just want a second opinion about how you are doing, I would welcome the opportunity of meeting and speaking with you. When you are working with me or any representative from WealthFinancial Group, there is never any pressure or obligation. And, of course, we will answer all your questions.

Gary Duell
Managing Member
Silver Sage Advisers LLC
13100 SE Sunnyside Rd Suite B
Clackamas OR 97015
503-698-4812

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20 Questions to Ask Your Adviser is published courtesy of Wealth Financial Group