Interviewing a potential investment advisor is an important step. This potential investment advisor is going to be a close partner and will lead you to reach your financial goals. Thus, it is important that their philosophy and services match your needs. In this article, we will discuss eight questions to ask a potential investment advisor during your initial meeting. A quality advisor should be able to answer each question to your satisfaction.
1. What Type of Services Do You Offer Your Clients?
You want to ensure that an investment advisor offers services to help you solve the problems you may face during your financial journey. This should include things like helping you choose investments that match both your risk tolerance and time horizon, providing you with a long-term investment strategy, rebalancing your portfolio, and creating an investment tax strategy.
Additionally, it is valuable to find an advisor that also provides other financial services. This is important because it shows that they understand other areas of your finances. Such knowledge helps prevent them from making investment decisions that will negatively affect other areas of your finances. Some of these additional services include tax preparation, tax planning, estate planning, life insurance, and long-term care insurance.
2. What Are Your Credentials?
Not everyone who holds themselves out as an investment advisor has credentials. Many have very limited education and training. Some have simply passed the relevant state exam. You want to partner with someone who has an advanced financial and retirement planning education. Ask them if they have such credentials as CFP® (Certified Financial Planner®) or CRPC™ (Chartered Retirement Planning Counselor™). Someone that holds such qualifications will be in the best place to provide you with quality investment advice.
3. Are You a Fiduciary
A fiduciary is someone that has a legal obligation to act in your best interest. An advisor that is a fiduciary can only pick investments or give advice that is in your best interest, not theirs.
4. How Are You Compensated?
There are many ways that an investment advisor can receive compensation. It could be hourly, commission-based, or fee-based. A fee-based advisor is typically the best choice for most. This is because the fee set up motivates them to make your account growth as successful as possible. Beware of a commission-based investment advisor. They make their money from account trades. This can lead to them making trades that are not necessarily right for you but generates a commission for them.
5. Does Your Firm Have Custody of My Funds?
An investment advisor should never have direct custody of your accounts. Instead, they should have a contract with a reputable custodian. The custodial company is the one who will hold your assets. Your advisor can only access your funds to make trades for you and process the appropriate fees.
6. What Is Your Investment Philosophy?
A valuable investment advisor should be able to give you their investment philosophy without hesitation. They should be able to tell you their investment strategies and explain the reasoning behind them. Additionally, you should also hear them explain how those strategies will help you reach your goals. All of this should be done in a way that is easy for you to comprehend.
7. How Can I Get Ahold of You?
Ensure that they outline the process of getting ahold of them and if it will entail any additional charges. Find out if you will be able to call or email them with questions and how often you will be able to schedule appointments.
8. Is There Anything I Forgot to Ask You?
By asking this question you give the potential investment advisor a chance to bring up any important information you may have forgotten about. It also shows you the level of engagement you may experience if you choose them as your advisor.
Choosing Your Investment Advisor
By asking the right questions to a potential investment advisor you can determine if they will be a good match for you. You should feel comfortable with their investment philosophy, credentials, and fees.
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