The 7 best questions to ask a financial advisor in 2022 (2023)

Today I'm sharing the best questions to ask a financial advisor in 2022.

Why?

Why hiring a financial adviser isone of the most important financial decisionsyou are going to do

And one wrong recommendation (from the wrong advisor!) can ruin your retirement plan.

If you're tired of seeing the same old questions to ask a financial advisor (eg, "How often will I hear from you?"), you'll really like this list.

The 7 questions to ask a financial advisor in 2022

There are more than 300,000financial advisorswe United States!

Unlike doctors and lawyers,the advisers arenorequired to use a consistent title.

Here are a few you can find:

• Financial Consultant
• Financial Advisor
• Wealth Consultant/Manager
• Investment consultant/manager
• Financial Consultant

Knowing what questions to ask a financial advisor will help you hire the right expert...

…and avoid hiring the next Bernie Madoff.

Are here7 best questionsto ask a financial adviser.

1. Are you a fiduciary... 100% of the time?

A fiduciary financial adviser islegally requiredto put your interest first.

A trustee is alsoforbidden to sella financial product (for example, annuity) in exchange for acommission.

your compensationmust come from you(the client).

And the dollar amount should be a transparent line on your statement.

If you are interested in working with a trustee (and I highly recommend it!), it is essential that you ask yourself the following question:

“Are you a trustee 100% of the time?”

Unfortunately,most financial advisors have to answer... NO!

Why?

Because most advisers are “double registered”.

A "double-registered" financial advisercan take off and put on fiduciary hat.

They arenot a trustee 100% of the time.

One day they are trustees putting their interests first and the next they aretrying to sell an insurance productcomhidden commissions.

When a financial advisor acts as fiduciary 100% of the time, you don't have to wonder if they're just trying to meet a sales quota.

If you have any doubts, ask your financial advisor (or one you are considering) to put your trust statement in writing.

👉Here is a sample fiduciary commitment statement[PDF]

2. Who do you specialize in working with and how many clients do you have?

It's important to ask a financial advisor what types of clients they specialize in working with.

After all, you wouldn't go to onepersonal injury lawyer if you need help with your divorce.

Here are some examples of financial advisor specializations:

• Specific professions, such as doctors, teachers, or evenspeech therapist.
• Employees of a large company, such asBroadcomo Microsoft.
• Certain age groups, such asmillennial generationlos baby boomers.

It is essential that your financial adviser has the right knowledge to help you withyour specific situation🇧🇷 It's also reassuring to know that they have helped other clients with similar needs.

Talking about other clients, asking a financial adviserhow many customers do you serveIt will help indicate two things:

1. How much time do they have to spend with you?
2. How personalized and personalized are your services

“The average experienced senior consultant has 96 clients”, according to financial services guru Michael Kitces.

3. What is my total cost of working with you? How are you compensated? Where can I see this in writing?

Just because you work with a financial advisor who is a fiduciary 100% of the time doesn't mean it's easy to understand the full costs.

Here are some of the common fees you may pay when working with a fiduciary financial advisor:

• Counseling fees.These can be in the form of hourly rates, one-time project fees, or a percentage of your investments.
• Transaction fees.They are charged by the custodian (eg Fidelity, Schwab) when your adviser buys or sells investments on your behalf and can range from $0 to $50 per trade.
• Expense rate.This fee is charged by a mutual fund or exchange-traded fund (ETF) to cover operating expenses and can range from0% to 3% (or more!)by year.

It is important to note that afiduciary financial adviser isonlycompensated bycounseling fee.

While they don't benefit from other fees, they still have a legal responsibility to keep those costs down.

For example, suppose your trustee recommends that you put$100,000 without S&P 500.

Here are two S&P 500 mutual funds and their expense ratios (as of 1/25/2022):

1. Rydex S&P 500 (RYSOX) =1,65% o$ 1.680by year
2. S&P 500 Fidelity (FXAIX) =0.015% o$ 15by year

That is a difference of$1,665 per year!

When two investments are identical (as in the example above), theirfiduciary financial adviseris bound to recommend the lowest cost option.

That is why it is so important to ask aboutany fees that may be incurred.

All SEC-registered financial advisers must provide you with their Form ADV and Form CRS. These documents will provide a detailed breakdown of your services and fees.

4. What experience do you have navigating the complex world of financial planning?

The experience of a financial adviser ismore than number of yearsthey have been in business.

What isprobablemore important is thekind of experienceThey have to solve very specific problems. Some examples include:

• Retirement Tax Cuts
• Create tax efficient retirement income
• Reduce risk and maximize return on investment
• Optimization of retirement insurance policies
• Increase tax deductions through charitable donations (for example,donor-advised funds)

Another important question is:

"Does your company have aprocessto provide financial planning and investment advisory services?

That process should include how they collect your data, how they analyze your specific situation, and how they arrive at recommendations.

The process should also include a methodology for implementing and monitoring this advice.

One way to gauge a financial adviser's experience is to ask about professional designations.

The most prominent designation is the CERTIFIED FINANCIAL PLANNER™ or CFP® certification.

Consider yourself a CFP® Professionalstrict ethical standardsand has to go throughseries of rigorous courses and exams.

In addition, a CFP® professional must haveat least three years of financial consulting experienceand a four-year college degree. They are also required to takecontinuing education classes every yearkeep up with the ever-changing world of financial planning.

5. Please provide me with a list of all the services you offer.

This list will help you understand if their services are focused in one area (ie investment management) or if they are comprehensive in nature.

Typical services may include general financial planning and investment management. However, many people have needs that go beyond the basics.

An example of importantfinancial advisor service is tax planning.

Strange as it may seem,your tax bill may be higher in retirement than as a working professional.

If you earn a lot or are a diligent saver, hire a financial planner who has the experience toreduce your tax bill each yearit is extremely important.

It should be easy for a consultant to provide a list of the services they provide. If the answer is vague or unclear, this could be a red flag.

6. Where do you keep my money and how can I see it?

If there's one thing on this list of questions you don't want to ignore, this is it.

Confirm that your financial adviser is using a large third-party custodianto maintain your investment/retirement accounts.

Known guardians include Fidelity, Schwab, and TD Ameritrade.

When your adviser works with a trusted third party custodian, they cannot dishonor your money. They have limited authority to manage your investments and supervise your accounts.

Hint: Bernie Madoff wasNOuse an external custodian

A third-party custodian also provides investors with FDIC and SIPC insurance.

“Helping to protect our customers' assets is an important part of our commitment to provide the best possible service,” says Fidelity.

Each third-party custodian provides online access for you to view your accounts. Many of them also have physical US locations for you to visit.

7. What is your investment philosophy and how do you manage investments?

While investments are only one part of financial planning, it's helpful to understand a consultant's philosophy and approach before you hire one.

Does the adviser use low-cost index funds? Do you actively trade individual stocks? What about investing in gold, hedge funds and other alternative investments?

Additional questions to consider:

• How do you incorporate investments held in a workplace retirement plan like a 401(k)?
• How many positions do you include in each portfolio?
• Can they incorporate individual stock positions that you don't want to sell?
• What about reaping tax losses?
• O,tax profit harvest?

In addition to getting answers to these questions and more, you can request a sample portfolio so you can go behind the scenes and see things for yourself. While you're at it, check your expense ratios!

Additional Free Resources for Investors

In addition to these questions to ask a financial advisor, here are some more helpful resources to consider:

• Questions to Ask a CFP® Professional[Financial Planning Association]
• Investor Resources and Checklists[I DIE]
• Financial Advisor Interview Questionnaire[Garrett's Planning Network]

Final Thoughts on Questions to Ask Financial Advisors in 2022

Choosing a financial advisor is one of the most important decisions you will make in your life.

Working with the right advisor for your unique situation can be the difference between a carefree retirement and a stressful one.

When you meet with a financial advisor, don't be afraid to ask the tough questions. Like any other professional, they are there to meet the needs of their clients. A good counselor will welcome any and all questions you ask.