3 Important Questions for Your Financial Advisor

Admittedly, this seems like a self-promoting post, so let’s get this out there on the front end: We get asked every week by prospective clients about questions related to hiring the RIGHT advisor and we hope this helps you regardless of who you chose to work with.

In order to accomplish this, let’s start with a common denominator: Investors want the best experience possible when hiring and working with a financial advisor.  The following points are designed to help provide a clear look at the client/advisor relationship and how a client can have a great experience when they chose the right advisor..

• How is the advisor paid?

In our opinion, complete transparency in terms of exactly how much the client is being charged for services rendered is very important. Unfortunately, the norm in the financial services industry is just the opposite. Too often clients pay for services in a way that is “baked into the cake” and impossible to understand. We believe that being clear on how your advisor gets compensated can be just as important as knowing how much they are compensated. Ideally, all compensation to the advisor should only come directly from the client, and should be plainly visible on the client’s statements. This prevents embedded expenses from distorting the cost of doing business and makes clear any and all incentives.

• What potential conflicts of interest may exist? 

It is always important to understand who benefits from the advice being given. All clients want to know that their best interests always come first when the advisor leads them in any direction. All clients want to prevent any situation where they might wonder if something is being recommended to you because the advisor or the firm needs to sell it. A great question to ask up front that will cut to the heart of the matter is, “Do you have a fiduciary responsibility to act in my best interest at all times?” The answer you are looking for is “yes.” Sadly, less than 10% of all advisors will be able to truthfully answer this question with a yes and provide anything to support that answer. Do everything you can to be sure your advisor is working for you, not their corporate parent.

• How do I end the relationship if I chose to and what costs are involved?

If for any reason a client needs to end the relationship they will want to know what the process is, how long it will take to get their money out, and what potential costs may be involved. Ask your advisor those questions! How quickly can you get your money out?  Are there any hooks to keep you from walking away from the relationship, financial or otherwise?  What termination fees or surrender charges would be involved? Asking these questions up front can help avoid being stuck with something you didn’t fully understand to begin with.

Careful consideration of even these 3 important points will help ensure that the client /advisor relationship is aimed at success and reduces the risk of any surprises to the client. The key is asking the right questions to make sure you understand how the relationship is structured. We hope this helps you today, and we welcome these discussions with our clients and any prospective clients who value integrity with transparency from a financial advisor.

Categorized in: Blog

This post was written by Conscient Capital