Choosing an advisor – or a team of advisors – is an important first step on your way to financial health. Just as with choosing any long-term partner, communication is key. Here are 5 questions to ask when meeting with potential financial advisors to get a better understanding of whether s/he is the right fit.
1. What is your philosophy?
It is crucial to understand a financial advisor’s philosophy, values, and code of conduct – and to make sure that it aligns with your worldview.
Some advisors are most interested in starting with investing your money; the Gassman Financial Group philosophy, on the other hand, is a “protection first philosophy.” We begin with protecting the assets that you currently have.
There is no right or wrong philosophy – what matters is that you find one that is right for your goals.
2. How have you worked with people like me?
There are many great financial advisors out there – but you don’t want someone who is simply great: you want someone who is great at solving your specific problems. Asking for examples of who his target clients are and how he has solved their problems will elucidate whether this is the right match.
3. What services do you provide? When do you refer to other advisors?
You will want to know upfront what your advisor does – and does not do – in house.
For example, some financial advisors see themselves as the architect of your financial plans: they will draw up the plans and then hand them over to you to find general contracters and subcontractors to execute.
Some financial advisors will be able to manage your money, but aren’t insurance specialists or cannot give you tax advice. Therefore, it may be helpful to ask about the licenses and certifications that your advisor and his team have.
Look for an advisor that has a CFP (certified financial planner designation), which requires two years and a board exam to get credentialed (unlike the Chartered Financial Consultant (ChFC) designation). Small business owners should look for for advisors who are CPAs (certified public accountants) and can help with tax advisory. CPAs who also have the PFS (Personal Financial Specialist) designation can help with advanced financial planning, including estate, retirement, investments and insurance.
It is important to ask your advisors when they refer to other advisors because it will give you insight into what they are not able to do inside the firm.
To get an idea of what’s out there, here are the services that we offer.
4. How are your services priced? What conflicts of interest may arise?
There are several types of pricing for financial planning services: some financial advisors charge based on a percentage of your assets that they manage, some charge a fixed fee, some receive a commission based on products that they sell to you, and some have hybrid fees. Service pricing should be transparent and the incentives for your advisor should be aligned with your best interest. Always ask about conflicts of interest to ensure that your advisor is always choosing what is best for your financial health.
5a. How much contact do you have with your clients?
Ask your advisor what his process is for putting together a plan and communicating with clients on an ongoing basis. The more clients and advisor has, the more challenging it is to personally reach out to you. You will want to find out how the advisor plans to communicate with you (is it via email? Newsletters? Personalized check-ins? If so, how often?). Find out how proactive vs. reactive the advisor plans to be?
5b. Will I be working only with you or with a team?
As a follow up from “how much contact will I have with you,” for financial advisors are part of a bigger team, you will want to know, from the start, how that relationship will work. Ask about who the point of communication is, ask about access to other members of the team with expertise that you may need, ask about access to senior advisors vs. working with more junior people. The last thing you want is a bait-and-switch or to expect one thing and get another – asking up-front can help make the most of a team with a multitude of expertise.