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Questions To Ask Your Financial Advisor

By: Investment and Retirement Center01.02.19
Couple talking with financial advisor

Between paying off student loans to thinking about buying a home, your 20s is a time filled with change, excitement, and yes, lots of financial decisions. With those financial decisions, comes questions like, “Which debt should I pay off first?” or “How do I secure the best mortgage for me, and one that I can afford?” As you deliberate on these various decisions, securing a financial advisor may be a good strategy, one that can help you navigate these big life changes.

The first step to getting a financial advisor? Do your homework and ask the right questions. To help you get started, our team has outlined our top 7 questions for a financial advisor below.

1. What’s your fiduciary status?

A financial advisor who accepts a fiduciary duty, means that they are committed to placing your interests in front of theirs. This is important when it comes to who will manage your money because fiduciaries must disclose their fees, how they are compensated, and potential conflicts of interest. However, “in contrast, non-fiduciary financial advisors might receive a commission in exchange for selling you a particular investment that isn’t the best for you – and not tell you they’ve profited from it” (Forbes).

2. How much will your services cost me?

According to The Balance, “the key here is to listen for an honest answer. A financial advisor should be willing to clearly explain all fees you will pay to them, and all expenses you will pay associated with any investment they recommend.” It’s important to note that not all financial advisors are paid the same way (i.e. commission structure vs. sales charge), but if the financial advisor dodges the question or leaves you with more questions, raise your red flag and keep looking for another financial advisor.

3. What is your investment philosophy? 

All financial advisors have their own style and philosophy, which is why you should make sure that your risk tolerance and goals are well-aligned with your financial advisor’s. In general, most financial experts recommend selecting a financial advisor that manages portfolios that are well-diversed, with low-cost investment, because “studies have shown that active managers very, very rarely outperform the market consistently over time” (TIME)

4. What other services does your firm provide?

When you ask this question to your financial advisor, the responses can range from only helping with advice on investments to a more comprehensive offering, i.e. tax planning, insurance, or estate planning. Depending on your needs, you’ll want to work with a financial advisor that meets and grows with your goals as they evolve over time.

5. When and how often will we communicate?

Like any relationship, understanding the form and frequency of communication with your financial advisory is an important factor in determining the success of the relationship. When it comes to understanding their communication-style, questions for a financial advisor could include, “How frequently do you communicate with your clients? Do you proactively send out rationale for buy/sell decisions?” (CNBC). Overall, a good rule of thumb is make sure you find a financial advisor who you are confident will be transparent and proactive.

6. What are your credentials?

From education to years of experience to credentials and licenses, don’t be afraid to ask these types of questions to a financial advisor. While there are a range of credentials that a financial advisor can hold, below is a good overview via Forbes that explains a few quality credentials to be on the lookout for.

“Of the four main types of financial advisors, the certified financial planner (CFP) designation is harder to achieve than Chartered Financial Consultant (ChFC), because the former requires a comprehensive board exam; the latter, however uses the same core curriculum. If you want someone to manage your money, then look for a registered investment advisor (RIA).” – Forbes

7. Can you explain (insert financial term) to me? 

Financial terminology can be confusing and overwhelming. That why it’s important that you have a financial advisor who can explain concepts to you in a way that you understand. For example, try asking a question to the financial advisor like, “What is an annuity?” If the financial advisor answers the questions in a way that leaves you with even more questions, you may want to keep looking for another financial advisor.

If you still have questions,  contact our team or consider joining  American Heritage Credit Union as a member, where we offer members the right financial solutions and treat members like family.



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