Make Sure to Ask These 7 Questions When Hiring a Financial Advisor

Make Sure to Ask These 7 Questions When Hiring a Financial Advisor

Make Sure to Ask These 7 Questions When Hiring a Financial Advisor | John L. Smallwood

Accomplishing financial success requires a knowledgeable team of professionals who will help you achieve your goals.  A comfortable financial future is not one that will just appear at retirement age.  Instead, deliberating strategic planning and execution on related goals is necessary for success – which is why you can’t do it alone.

Hiring a financial advisor is an extremely important decision; there are thousands of advisors that you can choose from. But, before hiring someone to help you with your wealth planning, ask the following questions to better understand whether they are in line with your needs. Here are seven essential questions to get you started.

  1. What scope of work do you provide advice on? A full spectrum of advice is the key to success, and every recommendation should be unique to you. Be aware of an advisor’s area of expertise or what their target clientele.  Make sure you are working with someone who will have your best interest at heart. You also want an advisor who is well-connected and understands the varying resources you’ll need to be successful.
  2. What is your experience, education, and licensing? It is important that an advisor have a CFP®, Series 7, 63, and Life Insurance License. Also, ask about experience — how long have they been providing advice? Have they seen or studied the trends to understand that everything in a plan can change from one year to the next? Just like someone who is looking to have a major surgery done, you want to make sure you work with the best. Only trust your financial future with those who have the experience and expertise to provide the advice you need to achieve your goals.
  3. Do your financial calculations account for the impact of taxation? Most financial software ignores the impact of taxation on your assets, creating a false sense of wealth creation. An advisor should understand that taxation is a part of wealth planning. Two of the greatest disruptors of wealth and its potential are taxation and fees. Income taxes, payroll taxes, sales taxes, state-level taxes—there are myriad ways your money is taxed. There are some fundamental concepts of taxes and fees that apply to the financial planning process. Find an advisor who wants to help you establish multiple sources of retirement income to balance out those taxes and fees so that the impact on your portfolio will be minimal.
  4. Do your financial calculations use average rates of return or market volatility adjusted returns? Investors do not receive average returns; they earn returns that are impacted by market volatility. That creates two different outcomes. The right financial advisor will help you create measurable goals and have a realistic view of your financial strategy. Part of that strategy must include understanding and minimizing the impact of market volatility on your money. While minimizing market volatility is easier said than done, with the unpredictability of the stock market surprising even the most seasoned investors, you want an advisor who can anticipate and plan for that volatility. Work with someone who can help you understand the difference between the average rate of return, the sequence of returns, and actual return.
  5. Do you deploy a single-focus investment strategy and make all portfolio choices? Is the advisor focused on selling a single product? Or do they view products as tools to create a comprehensive plan for you? Passive, active, tactical, and alternative investments all play important roles in the best plans. Remember, there is no magic wand that you can wave and save your financial plan. The “magic” that is going to save your retirement is to put multiple products and multiple strategies together in an integrated way that is unique to you, the individual.
  6. Do you have a support team and implementation network? Most advisors share a support person, and everything is dependent on the advisor doing everything. Look for a team. Find an environment where the family, the wealth advisor, and the team of accountants, attorneys, and insurance agents come together in a coordinated effort to work in the best interests of the client. Protecting wealth from all financial pressures should be the foundation of any wealth plan. It doesn’t take a lot to put proper wills, trusts, and asset protections in place. However, it does require consistency to stay up to date on new information, get clarity on changes that impact your plan, and work with a team of professionals who have the expertise to help you build your wealth.
  7. Do your recommendations incorporate asset protection ideas unique to my circumstances? Your unique set of financial variables require a design customized to you, not to your neighbor. The right financial advisor will capture unique dynamics and create a snapshot of your family makeup and elements of your financial life, including income, tax structure, savings rate, debt structure, and even lifestyle to help create the initial building blocks of a wealth plan. Your financial strategy is as unique as your fingerprint.

Remember, your advisor must be macro-minded. They must bring multiple disciplines to the table to be able to source the things that are most important to you. They don’t need to be an expert, but they need to be able to know how to source, find, and sift through solutions and make good decisions with you.


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