8 Questions to Ask a Personal Financial Consultant

So you’re thinking about working with a financial advisor. The first question to answer (seriously) is a simple one: Why?

After all, there are literally hundreds of financial planners, wealth managers, money managers, and financial consultants across southeast Iowa—each with their own approach to money management. Only your specific goals and careful research can help determine the right financial consultant for you.

“A real, meaningful relationship with a financial advisor requires thoughtfulness, good judgment, and experience to guide you through life’s many chapters,” said certified financial planner Tanya Nichols. “In order to make sure you find the right person to fill this important role in your life, you need to make sure you ask them the right questions.”

So, before you choose a personal financial consultant, make sure you know what you’re looking for:

• What type of help do you need? Are you just getting started, in terms of saving for a faraway future, or are you thinking more short-term?
• What are your goals? From buying a house (or even your first car) to paying off debt or planning for a steady stream of retirement income, your goals are key to every aspect of money management, from wealth management to portfolio evaluation and more.

Then, look for a qualified personal financial consultant with the skills, experience, and necessary certifications—yes, even if they are family friends or neighborly referrals—to help you reach your brightest future, says Morningstar director of finance Christine Benz.

“Even though advisors must obtain licenses if they’re selling securities, and pass tests and log work experience if they want to earn certain credentials, there aren’t any minimum standards in place for calling yourself a financial advisor,” Benz said. “You could work your whole life selling cars and no one would stop you from hanging out a shingle as a financial advisor tomorrow; you’d be competing head-to-head with advisors with years of experience and prospective clients wouldn’t necessarily know the difference.”

Since we’re talking about your money, we want to share eight questions to ask a personal financial consultant during the “interview” process. We hope they help you find the right fit for you and your family. And, of course, if you have any questions, please let us know!

1. Are you a fiduciary?

If the answer is “no,” it’s time to look elsewhere. No matter how nice a financial consultant candidate may seem, we recommend working only with those who are also fiduciaries. Here’s why:

• A fiduciary is an individual who acts in the best interest of a particular person or beneficiary.
• Fiduciary financial advisors must only buy and sell investments that are the best fit for their clients.
• Fiduciaries have a bond of trust with clients and must avoid conflicts of interest.

To look at it from another perspective, a wealth manager who’s not also a fiduciary can legally offer you “suitable” financial recommendations, investments opportunities, or products that benefit them more greatly than they benefit you—their client. Crazy, right?

2. How are you compensated?

Since there are a number of ways financial consultants can get paid, it’s important to know exactly how they’ll use your money to make themselves money, too.

We recommend focusing on fee-only, non-commission advisors who don’t make extra money for selling products. This makes it more likely that they’re keeping your best interests in mind.

“If you’ve decided to go with a fee-only advisor, you still need to ask about the specific business model, as well as a dollar estimate of what you’ll pay for the advisor’s services in a given year,” Benz said. “Ask for an estimate that includes underlying investment fees, too.”

3. Are there any additional fees beyond your compensation?

In addition to paying fees to your financial advisor, you’ll most likely pay other fees as well. That’s an unavoidable expense that shouldn’t keep you from working with a particular advisor over another—just be sure you’re aware of what you’re paying once you’re “all-in.”

A NerdWallet analysis found that a 1% mutual-fund fee could cost millennials $590,000 in retirement savings, said Alice Finn, founder of PowerHouse Assets.

“You can lose half your net worth without even knowing it,” she said. “You want to be vigilant.”

4. How will our relationship work?

When interviewing personal financial consultants, you’ll want to ask them about their client relationships, how they prefer to communicate with their clients, and how often they do so. By level-setting your expectations in advance, you’ll be able to eliminate (or reduce) frustration later.

“Most advisors have a general rule about how often they meet with clients, e.g., annually, semi-annually, or quarterly,” Nichols said. “Of course, if you request a supplemental meeting, most people are happy to oblige.

“Choose an advisor whose schedule works for you,” she continued. “You don’t want someone who seems overbearing, but you probably don’t want someone so hands-off that you forget why you’re paying them.”

5. Do you have an area of expertise?

Financial planning is a complex process that requires different strategies for different goals or life stages, said U.S. News & World Report contributor Coryanne Hicks.

“Advisors may specialize in one or more areas such as retirement planning or financial planning for women entrepreneurs,” she said. “They can also focus on different areas of the planning process such as managing investments or developing holistic plans.”

6. What is your investment philosophy or approach?

Just as you’d want to know the approach of anybody advising you on, well, anything, Nichols recommends taking time to understand the philosophy of the personal financial consultant who is going to be handling your money to make sure that it aligns with your own.

Here are three important questions you can ask candidates to help you zero in on their individual financial philosophies:

• How will you choose the specific investments in my account?
• Do you use individual stocks or mutual funds?
• How often will you rebalance or change my accounts?

7. How do you measure success?

Financial growth is key when it comes to measuring the success of your relationship with your personal financial consultant, said Nerdwallet retirement and investment expert Andrea Coombes.

Again, make sure your goals are aligned and that you make clear that you’re looking for tangible results over vague promises. Here are a few examples:

“Advisors should use benchmarks that directly relate to what they’re invested in, or be able to explain why they don’t,” Coombes said.

8. How will this affect my taxes?

Your advisor should take your specific needs into consideration when handling your money, especially your tax situation, Nichols said.

“Just as all financial advisors are not created equal, neither are all clients,” she said. “Give the advisor an opportunity to talk about how they will tailor their advice to your circumstances.”

This helps ensure your personal financial consultant has your tax bill in mind when making financial decisions. But regardless of what anyone tells you, Finn said one question is on every investor’s mind: “What do you get to keep after fees and after taxes?”

Get started today – start a conversation at SENB Bank!

Is talking to a financial consultant on your to-do list? Why wait? SENB’s wealth management team of local, Quad Cities-based, personal financial consultants is ready to help you plan for and reach a successful financial future. When you’re ready to begin, learn more about us online, schedule an appointment, or give us a call at (309) 743-1202. We look forward to helping make your financial life the best it can be!