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What should your Financial Advisor ask you ???

Updated on August 8, 2013

Financial Guidance

Often we read articles & commentary about what to ask your financial advisor. But what should your financial advisor be asking you. Often times that alone can tell you whether or not you are engaged in a financial advisory relationship that is in your best interest.

Recently I had lunch with a few former colleagues whom I had worked with some time ago. They told me of a new sales manager they were recently asked to report to, whom sadly had less experience than many of those whom he was managing. The conversation reminded me of why I left the retail broker dealer business and had decided to become an independent registered investment advisor. Apparently this new sales manager, full of enthusiasm, was encouraging his staff to insist that each of his financial advisors request at least 10 referrals at an initial new client meeting before having even provided a service to the person sitting across from you. It reminded me how as a Certified Financial Planner, working in an environment in which you report to a sales manager can be in direct conflict with your fiduciary oath. Unfortunately, nearly everyone whom is working directly for a broker dealer or insurance company providing financial or investment advice to the public answers to a sales manager of sorts. I have yet to meet a sales manager in the financial services field whom cares about anything other than increasing the monthly sales production. Yet this has virtually nothing to do with financial planning or appropriate advice, and is not in your best interest as the client.

Many advisors wish to provide sound guidance to their clients, yet simply don’t have the time as they attempt to try to hit monthly sales production goals. And of course there are always those whom are pure salesman and simply don’t care about your financial goals. One key way to determine whether or not your advisor has your best interest in mind is whether or not they listen to you more than they talk when you first meet. A financial advisor whom is truly trying to help you achieve a goal such as planning for retirement should not have a predetermined product or investment solution that they wish to sell you. It is highly inappropriate to suggest a solution to a client at an initial meeting. Your first appointment should be exclusively information gathering for both you and the financial advisor. As the old saying goes…you have to date before you get married.

So what should your advisor be asking you ??? Well for one thing, those clients whom are retired or fairly close to retirement should be working closely with the advisor in examining their budget. This means looking closely at both essential and discretionary spending. It also means assigning proper inflationary adjustments to different types of expenditures. Your budget is not necessarily for your advisor to determine. However it is important for a good financial planner to examine your lifestyle, stress test it against your asset base and investment strategy. Often the most important advice you receive and what a good advisor will uncover will have nothing to do with altering an investment in your portfolio. Rather it may be some other financial concern that you hadn’t realized may affect you in ways you didn’t realize.

Any financial advisor whom truly cares about your circumstance should at a minimum understand how you’ve titled assets. Whether or not certain assets are held jointly, in trust or some other form of ownership is a substantial consideration. While they likely won’t draft legal documents on your behalf, how can they provide you with an investment strategy without understanding how certain assets liquid or illiquid will be distributed through your estate and in which order. Furthermore, should there not be a current estate plan in place, a sound financial advisor should be able to identify at least some basic risks you may face and provide you with some guidance with which you can take to legal counsel.

Is your advisor paying attention to your insurance coverage ??? Not just the life insurance policies and annuities he can sell you. But are they interested in your personal liability such as your property and casualty policies ???

Does your financial advisor question other estate essentials such has your will, living will and power of attorney document ???

A financial advisor whom has your best interest in mind should be asking a whole host of questions to establish a complete and concise picture of who you are and where you wish to be heading before making suggestions. They’re focus should always be on you and not the newest latest and greatest product offering. They should understand that their role is to coordinate a larger picture. They must know a little about many topics and a lot about you. It may sound simple and basic, but unfortunately my experience over the last fifteen years in the financial planning field is that most financial advisors do not give adequate attention to these matters. They’re often either pressured by a sales manager or simply too focused on the next sale to create a coordinated strategy. This often leads to a client with two half loaves of bread that don’t equal a whole loaf.

My advice to those looking for a financial advisor is find one whom is a registered investment advisor and is not affiliated with a broker or insurance firm that requires them to sell certain products. One whom is compensated on a Fee Only basis with no conflicts of interest. Most importantly, pay close attention to how interested they are in you and your goals when you first meet. Because it is about you, and your future is important.


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