“It is important to talk to several advisors before selecting one in order to find one with whom you are comfortable,” says Gharib. “Interview financial planners like you would anyone you would hire, whether employee or a contractor.”
4 Questions to Ask a Potential Advisor
How are you compensated? Would you hire an employee or contractor and not know what you are paying them? There are several ways advisors can be compensated: commission only, percentage of assets only, or a combination of commission and fee.
Are you an investment advisor, broker or both? In most cases it is preferable to work with a financial professional that is both a broker and advisor. One of the reasons it is important to know whether the planner you are interviewing is an investment advisor, broker or both is because not all products make sense to be charged a commission or a percentage of assets. It is in your best interest to make sure your advisor has the flexibility to charge a commission when it makes sense and fee based on the percentage of assets managed when it makes sense.
How often do you recommend my portfolio be reviewed? You should have a clear understanding of how often your advisor will contact you. I recommend at least quarterly contact to review the performance of your portfolio, to keep your planner up-to-date on any life changes (employment, marriage, divorce, etc.) and to review the current market and make sure your investments are still in balance with achieving your financial goals .
How long have you been with your current firm and how long have you actually been advising clients? A mistake many people make is simply asking how long a planner has been in the business.
4 Mistakes Investors Make When Working With Financial Planners
- Investors don’t clearly know how much they are paying annually for all fees and costs.
- Investors don’t ask how long the planner has actually been advising clients.
- Investors believe if they get references the planner must be good.
- Investors don’t clarify their expectations with their planner.
To read the rest of Gharib's advice -- plus four
tips for hiring an advisor, go to Tips for Choosing a Financial
Planner.
Laurie Pawlik-Kienlen is a full-time writer and
blogger who created and maintains a series of Quips and Tips
blogs: Quips and Tips for Successful
Writers, Quips
and Tips for Achieving Your Goals, and
Quips and Tips for Couples Coping With
Infertility. She's also the Feature
Writer for Psychology
Suite101.
