Hard Ball Questions You Should Ask Your Financial Advisor

Most people spend more time figuring out what car to buy than they do working out where they should put their money, according to data presented by CNBC news. Cars are a major purchase, so you’d expect people to invest considerable time into working out whether they are making the right choice. But where to allocate your assets is arguably a much bigger decision.

This is why quizzing your financial advisor is important. They’re going to be responsible for a much larger chunk of your wealth than, say, a car dealer. And as such, they need to be asked some tough questions.

Are Your Fees Transparent?

The first question to ask is how an advisor actually gets paid. Are their prices transparent? Or do you not know exactly how they’re getting paid, and how much?

It’s also worth finding out what their charges are compared to other firms and why they cost less or more than the competition.

According to CNBC, advisors should always be 100 percent transparent about how they make their money and how they get paid. For instance, some advisors ask for a commission on any gains that they generate using your money. You need to know what this percentage is before you give them permission to invest your money. Others use a complicated fee structure, where some of your capital gains are paid to the advisor and some to the firm.

Do You Have Experience In A Particular Market?

Many people looking for financial advice, want advisors who have experience in particular markets. For instance, expats looking to invest in property abroad will want advisors who are able to guide them through the particularities of those specific markets. Enness International, a consulting firm, recommends that people choose companies that have people on their teams who are fluent in the local language and who offer ancillary services to help smooth things like buying a house.

It’s also worth investigating the work that a firm has done before in a particular field and asking previous customers for testimonials about their experience.

Do You Actively Communicate With Clients?

Another sign of a great advisor is one who regularly communicates with clients, especially when new information becomes available. For instance, in the run up to the election of Donald Trump, most advisors thought that Hillary Clinton was sure to win the Whitehouse. As a result, those advisors who saw the writing on the wall that Trump would ultimately win, also saw that a Trump victory would cause stocks to spike - which they did. As such, they told their clients to invest heavily in stocks beforehand and then sell when the market peaked in the weeks after the election.

Advisors shouldn’t need to call you about every buy and sell decision. But they should keep you updated when they take risks with your money. Look out for advisors who do things like have a weekly market commentary, send out a newsletter and produce educational videos. These tend to be the most informed and the highest-quality.