What To Ask Your Financial Adviser


What To Ask Your Financial Adviser

By Ryan Velez

In general, you picture a financial adviser as a benevolent figure in your life, helping you make the most out of your money with wise investments as well as other advice on how to handle your wealth. However, the financial industry has another side, where financial professionals may focus on selling annuities and mutual funds without exactly working one-on-one with you to provide info and set concrete financial goals. Without these in place, the products they offer are no longer part of a concrete financial strategy. A recent article from The Network Journal keeps you from falling in this position with important questions to ask your financial advisers.

The first thing to ask is whether or not your adviser plans to look at your tax return. The Network Journal uses a simple analogy to help get across how important this is. Would you trust a doctor who doesn’t run any tests or look at bloodwork. Would you trust a building contractor with no blueprints? In many ways, the tax return serves as a base for the financial advisor’s job. Each year, your professional of choice should be discussing wages, IRA distributions and capital gains with you. In addition, they can help you plan for the future with loss carryforward, dividend income, itemized deductions and taxable Social Security.

The second question regards your mutual funds, specifically, how well they can break down the different aspects of your mutual funds. In many cases, the way a fund is purchased and sold can have massive effects, even for the same amount of money. This could lead to multiple charges, but depending on the way you buy it, you may just pay a fee to your financial advisor on top of whatever money you are putting in. The simplest rule of thumb is to look at your investment statement. Anything you see that you don’t understand, just ask. Who knows what you could save.

The final question may be a bit awkward, but it’s something that you can’t avoid. Is your adviser fee-based, or do they work on commission? One charges a fee for planning and managing a portfolio, and the other gets commissions based on the funds or products they offer. Some offer a hybrid of this, and both are viable if you have a suitable professional. However, The Network Journal suggests that the fee-based model may be a better fit when it comes to the modern financial world. Theoretically, this cuts down on worries of whether or not decisions are being made in your best interest. But you should have a clear understanding of what you are being charged and what the financial strategy is. If you feel that you are just having products pushed on you, then the time may come to seek out another financial professional.

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