I recently gave a free presentation at the public library for women wanting to learn more about investing. It was a great feeling to see several dozen women wanting to do the hard work of learning more about finances. Though I think I made progress teaching these ladies about the benefits of diversification and buy and hold strategies, I discovered a problem. I was a bit shocked to hear the many of the women who did have a financial advisor didn’t know what he or she did to help them. Many of them asked me, “Can you give me a list of questions to ask my financial advisor? They are open to talking to me a few times a year, but I just don’t know what to ask them.”
If you’re confused or unsure of the value, there are good questions you can ask to make sure you understand the benefits and services you will get from the fees you pay. In general, I find many people are confused about what a financial advisor does. Some think it’s just about managing retirement assets. Advisors offer that service, but it should be made clear to the consumer if that’s all they are supposed to get. However, when I think about financial advising and planning, I think about working one-on-one with clients to look at all the various aspects of a person’s life including debt, assets, investments, potential risks, scenario planning, retirement, estates and wills, taxation, etc. This stuff gets complicated and there’s never a one-size-fits-all approach.
The reason I started my business is because I know there are a lot of people out there searching for this kind of holistic advice about their finances. Yes, you can find a ton of information on the internet and use a robo-advisor to manage your assets for you. But there’s still nothing out there that can automate talking to a real human about the things that are important to you in life and making sure your financial plan is in line with those things.
If you have an advisor, here are some questions to ask the next time you have a meeting to dig deeper into your finances (including the value you’re getting from the advisor). If you don’t have an advisor, these are some of the types of questions you can expect to discuss in a meeting.
- Can we review my financial plan?
- Am I on target for the things I want to achieve now and in retirement?
- Can we review my goals to make sure they are still relevant?
- Would you explain the pros and cons of my current asset allocation?
- How often do we rebalance and why have you chosen that schedule?
- What are all the benefits and services I get from the fees I pay you?
- What would happen if I wanted to retire earlier / later or start a business on the side?
- Are there any other common scenarios you would recommend that we take a look at?
- What are the benefits of what you are proposing and are the any potential downsides?
- What unexpected scenarios might cause problems with this projection?
- What are the pros and cons of buying other types of financial products such as annuities or insurance products? At what age do people normally purchase this type of product?
- How do I shop for insurance and annuities? How do I know I’ve gotten a good deal?
- Do you have any written information that explains these financial products? Do you have any external resources that I can review before making this decision?
- What are some ways I can use debt efficiently, and does this change as I go through life?
- What would you do if you were in my situation?
- How are my investments optimized for taxes?
- How will taxation work differently as I move into retirement or my situation changes?
- Is there anything else about my insurance/retirement/investing/debt I am missing?
- I thought that I would look into <fill in a product or question you have> as a product/tool/option — does that sound like a smart idea? Can you give me the pros and cons of this option?
- Can you provide a checklist of things I need to make sure I’ve done related to my will and estate?
- Can you provide an end-of-year checklist for tax items I should think about?
I’m sure I could come up with 21 more questions to ask, but I think this is more than enough to fill up an hour conversation the next time you speak to your advisor. Just remember, no questions are bad questions. This stuff is dense and complicated. If you don’t understand something, just say, “I’m not following you, can we review that again in a different way?”
Please let me know if you have any other questions that you would ask. I’ll add them to my list and make sure that I share them next time I give a talk.