Written by: Dan Stevens, Financial Advisor at Burnham Gibson Wealth Advisors
These ten questions can be for a current advisor, or great questions to ask any prospective advisor you may consider hiring. Either way, your chosen financial professional should have satisfactory answers to each of these questions, and you deserve to know them.
1. Are you licensed? For what?
There are plenty of men and women in financial services holding themselves out to be qualified to manage your money. The challenge is that there is a very wide array of licenses and qualifications, and they all sound the same to the layman. For example, “financial consultants” can be much more limited in scope than “financial advisors.”
2. Are you a fiduciary?
Aside from hoping an advisor wants the best for their client, an advisor acting in a fiduciary capacity is legally and ethically bound to put their client’s best interests ahead of their own. This benchmark far exceeds a “suitability” standard, and represents the standard that I know my clients expect from me as their advisor.
3. What is your expertise?
As an example, the job title “attorney” is often accompanied by an expertise, such as “family law attorney.” In the same way one would not want a family law attorney creating their estate plan, or a criminal defense attorney doing ERISA work, it is important to make sure your advisor is capable of the job required. While there may be a team of highly qualified, capable professionals behind the scenes, it is important to make sure you’re talking to the right person who will be handling your needs.
4. How does your firm equip you to help me?
Having a relationship with an advisor is important, but that advisor will only be as helpful to you as his or her resources available. Advisors cannot do everything themselves, so they must have resources that better the quality of investment research and monitoring. Some examples include an independent investment research team, administrative assistants to help with the paperwork and compliance, and other advisors with complimentary expertise.
5. How do you get paid?
No advisor should work for free, but understanding their method of compensation will help you understand their methodology. Annual fees, and flat fees are common ways advisors get paid for their work for you. Regardless of the method chosen, the important part is that this will help better understand how they will work with you, and from where the fee is coming.
6. What are your fees?
Fees are an obvious and necessary part of financial services. Of course, some fees will be justifiably higher than others, depending on the complexity of the solution to the problem solved. While you should know what your fees are before implementation, the key is that they are justified.
7. What services justify your fees?
Fees need to be justifiable, not necessarily “low.” While fees that are too high can detract from investment performance over time, fees that are too low can indicate a host of other possible issues. One of such issues is that excessively low fees can limit how much time and attention the advisor will put into your investment, and typically indicate lesser ongoing service. Fees can also reflect the amount of research and expertise behind where you are investing your hard-earned money. Like anything in life, you get what you pay for, and your advisor should be very clear as to what initial and ongoing services justify his or her fees.
8. What is your process?
Financial advisors should have a process that they follow to onboard new prospective clients. The single most important step for the advisor in this process is to deeply understand the client’s situation, both quantitatively and qualitatively. This means that before making any recommendation, any advisor must have a firm understanding of your goals, ambitions, and feelings, as well as assets, liabilities, and investments. Variations in an onboarding process are fine, but this step must be comfortably addressed before discussing products or investments.
9. What is your client service schedule?
The ongoing relationship between client and advisor is extremely important to the long-term success of one’s financial goals. This relationship is kept largely due to a planned client service schedule. If you know you will be receiving at least X number of phone calls and Y number of reviews every year, that intentional consistency will allow the relationship to grow and improve over the long term.
10. How do I get started?
Contact a Burnham Gibson financial advisor and set up a consultation today!