7 Questions you need to ask your Financial Adviser

7 Questions you need to ask your Financial Adviser

The answers could help you get more out of your money

Published: September 2014

Does your relationship with your financial adviser leave you with a nagging case of buyer’s remorse? Do you sense that somehow you should be getting more—but you’re not sure what? Maybe the problem isn’t your adviser but how you manage your relationship with him or her.

In fact, your adviser will probably be the first to appreciate it if you take the lead from day one, expressing your expectations and voicing your concerns. To make sure your collaboration is mutually satisfactory, ask your adviser the following 7 questions:

• Do we have the same expectations? The road to remorse—and a search for a new adviser—often begins with a difference in expectations. “I find a lot of the time we think we’re on the same page—the client is nodding—but it turns out we’re not,” Jamerson says.

The disconnect could be due to mixed signals you unintentionally send. For instance, you might have expressed a wish for returns commensurate with an aggressive investing approach, even though you’re really comfortable only with a very conservative risk level. Conversely, you may have given your adviser the impression that you don’t want to extend yourself, when in fact you’re disappointed if the Standard & Poor’s 500 Index is up double digits and your portfolio has stagnated. One of the reasons you pay a pro is to help you to stick to your long-term objectives, but communicating them is your job.

Read about the truths financial pro's won't tell you. And visit the Consumer Reports Investing Center for investor education and resources.

• How do you plan to get those returns? Prospective advisers hoping to win new business may make promises that ultimately prove too good to be true. An obvious example is performance; telling a potential client that he will “outperform the market” is just setting up that client for disappointment. “The stock market is one of those things we have the least amount of control over because it’s driven by unknown random events that will occur in the future,” Jamerson explains. Investors need to understand how markets work, he emphasizes, and how asset allocation and diversification can temper risks and returns. “Understanding that up front will lead to a more productive relationship,” he says.

• Will you help me become better educated? Whether you want Personal Finance 101 or the equivalent of a master’s degree, there’s such a glut of financial advice available that “people just throw their hands up in the air,”  says Eric Remjeske, president of Devenir, a financial-services business in Minneapolis. Will your adviser offer guidance? Can he refer you to helpful books or websites tailored to your level of interest and understanding? Does she or her firm sponsor seminars with investment specialists on topics pertinent to your portfolio? Does she invite you to send her a magazine article and ask her opinion about whether it applies to you? “You don’t need to know everything the adviser knows, but ultimately, you need to feel confident that the adviser is helping you make educated decisions,” says Lance Jamerson, senior wealth manager at Howard Financial Services, based in Dallas.

• Could you please speak English? Does your adviser natter on about NAVs and alphas and betas and R-squares? Financial-speak may sound impressive, but unless you, too, are fluent, it’s about as understandable as ancient Aramaic. The problem, explains Marcia Mantell of Mantell Retirement Consulting in Needham, Mass., is that we want advisers to be at the Ph.D. level of knowledge while we’re still in high school. The result: “You have people with two different levels of knowledge trying to talk about a common topic—your money. Someone is always off-kilter.” You don’t want to risk something important getting lost in translation, so don’t be shy about asking your adviser to speak in a language you understand.

Similarly, feel free to challenge your adviser about the complexity of the financial plan she delivers, Remjeske counsels. People might think they need an extensive financial plan, but “these things can be big and clumsy and not very accurate,” he says. If you want a sophisticated plan, ask for it. But if you prefer a one-page depiction of how your savings will last throughout your lifetime, that’s OK, too. And if you need help deciphering your statement, by all means speak up.

• Who else is on your team? Most investment professionals don’t do taxes, and most accountants don’t offer financial advice, but they can pool their resources. The questions: Does your adviser have backup if you need it? Can she refer you to and quarterback a team of experts in other areas who will attend to all of your financial needs, such as taxes, estate planning, retirement planning, charitable giving, portfolio research analysis, and insurance? To be sure, some people prefer a wall between those functions. But if you would like to have them connected, can your adviser manage the coordination?

• What investment strategies can minimize my taxes? Is your adviser utilizing tax gain/loss harvesting to minimize short-term capital gains? Can she suggest how to get more charitable bang for your bucks? Is she sensitive to how refinancing your mortgage might skew your overall portfolio? Ask yourself when your adviser last looked over your tax returns. “If the answer is ‘never,’ that’s a red flag” that he could be doing more, says Mike Piershale, president of Piershale Financial Group in Crystal Lake, Ill.

• How often can I expect to hear from you? Actually, that is a tactful way to tell your adviser how frequently you would like to communicate with her. Do you prefer to meet in person twice a year? Do you want to schedule a phone call every three months to discuss the quarterly statements, or does a 20-minute monthly check-in suit you best? Or do you expect your adviser to contact you when there’s news that affects your money?

While you’re at it, don’t hesitate to express how you’d like to receive information. Electronic statements might be convenient, but you may prefer hard copies that you can scribble all over. “Be prepared to say, ‘This is what I need,’ ” Mantell says.

• Would you talk to me, not just my husband? A recent study by Fidelity Investments found that when couples interact with a financial adviser, men are 58 percent more likely than women to be the primary contact. Too often, women find that they’re sidelined and condescended to by the adviser. Not surprising, as many as 70 percent of widows ditch their adviser within a year of their husband’s death—for precisely that reason. Even Mantell, who is herself a financial professional, found that when she and her husband were interviewing prospective estate-planning attorneys, “the first three didn’t look at me during the conversation.” She hung tough, though, until their fourth candidate met her requirements—and her gaze. 

Editor's Note:

A version of this article appeared in the September 2014 issue of Consumer Reports Money Adviser.

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