Are you ready to get some guidance on how to make your finances work for you?
Working with a financial advisor isn’t just for the top earners—it’s for anyone who wants to take claim of their personal finances, all so they can reach the goals they set for themselves.
Choosing the right financial advisor can set you on the road to a bright future, foster a sense of financial security, and help you and your family bring your dreams to life. After all, financial planning isn’t just about investing in stocks and bonds; it’s investing in some of life’s biggest adventures.
Before you start working with a financial advisor, you should ensure you’re partnering with the right person for you; someone you can trust and work with for the long haul. Here are a few questions to ask to learn more about them before you hire a financial advisor.
1. “What Qualifications and Certifications Do You Have?”
Financial advisors often have a long list of initials or titles that follow their name—and you’ll want to know what each of these means, as well as who they answer to. Are they the sole custodian of your accounts, or do they work for a brokerage that holds them accountable? Do they have certain certifications? For example, an investment advisor has a different job than a certified financial planner:
- An investment advisor is registered with the government and can help you choose and manage your investments. They have to follow regulations set forth by the state and/or the Securities Exchange Commission—depending on how much money they offer. They may also offer additional services including retirement or estate planning. You may also hear investment advisors referred to as “stock brokers.”
- A certified financial planner is another kind of financial advisor. They have met the most stringent requirements and passed certification exams proving their knowledge of financial planning, and have multiple years of experience in the financial planning field. They are also held to a strict ethical standard and are proficient in income and estate planning, retirement planning, investments, tax planning, and even risk management. Those who need a broad range of services may opt to work with a certified financial planner.
While both may give you excellent advice, one financial advisor’s qualifications and compliance requirements may better suit your needs and leave you feeling more confident about your working relationship—not to mention your financial portfolio.
Also, you may want to ask whether or not a financial advisor you are considering is a fiduciary. A fiduciary financial advisor is legally bound to act in your best interest, which can help strengthen your bond of trust and ease any worries you may have about conflicts of interest. When you work with a fiduciary financial advisor, you know that they are aligning their actions with what is best for you. Certified financial planners qualify as fiduciary advisors.
Another way to find a financial advisor you know you can trust is to discover whether or not they act as their own custodian or if they work through a brokerage.
2. “What Is Your Philosophy When It Comes to Investing?”
Your financial advisor will oversee your assets and your entire investment portfolio on your behalf—which means you want to be sure you share the same vision for how that should all be accomplished. While you and your financial advisor will come up with a strategy to achieve your goals, you will want to be on the same page about how that strategy should play out.
If you know—and trust—that your financial advisor shares your same investment philosophy, you can have faith in their advice even during the bottom of a market cycle when you might have questions about what to do next.
Additionally, if things like impact investing or values-based investing are important to you, that’s something you should consider when evaluating which financial advisor is the right fit for you. If you’re looking to achieve your personal financial goals while also contributing to positive, measurable change, you should seek out a financial advisor with a common philosophy. Does the financial advisor you’re considering share this same vision—and will they be able to help you build a portfolio that’s aligned with your financial goals as well as your personal values?
3. “How Do You Allocate Client Assets—And How Do You Evaluate Your Progress?”
“Don’t put all your eggs in one basket” is an oft-repeated phrase that’s incredibly apt when it comes to planning your future and reaching your financial goals. This is why it’s important to determine just how focused a financial planner is when it comes to asset allocation.
Your financial advisor can help you build a diversified portfolio as part of an asset allocation strategy, which can help drive your returns.
Asset allocation is a significant factor in how much risk you want to take on. By spreading your portfolio and your investable dollars across numerous assets and various kinds of investments, you can guarantee a bit more safety. Depending on your financial goals, your tolerance to risk, and even your age, you may choose asset allocation strategies accordingly. While riskier, less diverse allocations may have higher annualized returns, the risk of a year resulting in loss is also higher. You should discuss these concepts with your financial advisor to ensure you share similar ideas on asset allocation.
Similarly, you should talk to any financial advisor you are considering about what benchmarks they use to mark progress. Some advisors may set goals like surpassing the performance of the Standard & Poor’s 500, but this may not match your asset allocation strategy (particularly if your assets are not widely allocated).
4. “What Kind of Financial Planning Services Do You Offer?”
Depending on where you are in life and your financial journey, you may have different needs from a family member or friend who refers you to their trusted financial advisor. This is perfectly fine—as long as this advisor offers the services you need to reach your individual goals.
Services can vary from one advisor to the next, but they can include:
- Financial planning and advising
- Retirement planning
- Socially responsible and impact investing
- Portfolio analysis
- Employer-sponsored retirement plans
- Estate planning
- College funding
- Asset allocation and advising
- Tax planning
Other financial advisors may offer additional services like debt management (for things like student loans, mortgages, or even credit card debt) or budgeting help, as well as insurance coverage including disability insurance or long-term care coverage.
5. “What Fee Structure Do You Have In Place? How Do You Get Paid?”
For quite some time, all financial advisors were paid in basically the same manner—but this isn’t necessarily the case anymore. Clients used to pay their financial advisors a set percentage of the assets they managed for them, but today, financial advisors are paid on a wide range of fee structures. Why does this matter? It means financial advisory services can be more accessible to clients in every financial bracket.
- Commission-only advisors are paid a portion of what their clients invest or purchase, usually through an investment brokerage or an insurance brokerage. They are often only held to suitability standards and are seldom fiduciary financial advisors.
- Fee-only or fee-based advisors charge their clients either based on a percentage of the assets they have under management, or some are charged hourly, via a plan, with a retainer agreement, or even through a subscription model.
Some financial advisors may offer more than one fee structure so that you can choose which model works best for you and your goals. For example, an advisor may offer fee-based investment management services as well as consulting services at an hourly rate.
Ask any financial advisor you’re considering if they make sales commissions—fiduciaries, for instance, are required to do only what’s best for their clients, so they do not receive sales commissions from suppliers, which could potentially be a conflict of interest. You want to find a financial advisor who is 100% transparent in their fee structure so you don’t end up with any hidden charges.
A Financial Advisor Who Shares Your Values, Vision, and Goals
At Fingerlakes Wealth Management, we know that your financial portfolio is so much more than just dollars and cents; it’s your future. That’s why we work to understand where you are, where you want to go, and how we can best help you get there.
As a fiduciary, we build your financial plan around you—and you alone. We’ll take into account your family, your values, and your goals, and help adjust when life happens and your objectives shift and evolve over time. With a deeply-held philosophy of impact and value-based investing and a broad variety of services, we’re eager to support your goals at every stage of life, no matter your background, your financial situation, or your hopes and dreams for the future.