You’ve decided to speak with a Financial Advisor (FA) for the first time—good move! Over half of Americans don’t work with FAs; however, according to U.S. News & World Report, studies have shown that those who do are better prepared for retirement and more confident about their future.
For many of us, the thought of that first conversation can be a little intimidating, especially if you don’t have a clear financial plan. There ought to be a cheat sheet so that when you make the call to an FA, you get the answers you need to start the relationship off on the right foot.
That’s why we sat down with Misty Lynch, John Hancock’s Head of Financial Planning to come up with a list of 8 questions you should ask before you team up with an FA.
1. Could you tell me a little about yourself?
It’s perfectly acceptable to ask the FA to talk about themselves to see if you’re a good match. When you’re sharing so much information, you need to know if this is a person you feel comfortable with, that this is someone you can trust. You should never feel awkward, uncomfortable, or intimidated.
2. What kind of clients do you work with?
Asking an advisor what their ideal client looks like is a great way to see if you’re going to work well together. You probably don’t want to work with someone’s whose philosophies—either personal or financial—don’t mesh with yours. No matter what, it’s important to understand their expectations to help ensure you’re both what the other’s looking for.
3. How many other clients do you have?
You could be speaking with a FA who is starting a new practice, with 50 clients they know everything about, or an FA with 400 clients they manage with the help of a team of FAs. If someone has a small practice they might say, “When you call, my cell phone rings and we’ll talk every time,” whereas an FA with hundreds of clients might say, “You should contact this person and get to know him/her, as they’ll help you if you just have a quick question.” There are pros and cons to both but getting a sense of your FA’s business model will help you understand how much attention you’re likely to get.
4. Can you tell me about a time you helped a client?
A good FA should be able to tell you a story about a goal they helped a client reach, whether that’s helping them get out of debt or buy their dream home. A trustworthy advisor who’s going to have your interests at heart will have a lot of those kind of success stories to tell.
5. How do you get paid?
This should be something that’s easy for any reputable FA to answer. Today’s FAs work within different fee structures and commissions, so there’s not necessarily one right answer. But if an advisor is ever offering a service for free, it’s worth asking them how they earn their salary, so you can figure out if they have any conflicts of interest.
6. Are you a fiduciary?
By definition, a fiduciary manages assets on your behalf. They are required to act in your best interest. It’s important for you to understand whether someone’s working to sell you something “suitable” or if they’re legally bound to do what’s in your best interest at all times. It’s not always 100% clear, so it’s always good to get that clarification from your potential long-term advisor.
7. How secure are your services?
Because cybersecurity is a serious issue, it’s good to ask what information systems your advisor is using, how your information is being stored, what software partners they work with, and how your information is being protected. You’re going to be sharing a lot of personal financial data with your FA, so you should know how secure it is and who’s responsible for its safety.
8. How much control do I have over the decisions that get made?
Some FAs make all of the investment decisions with no client input. This might be perfect for some who’s looking to outsource all investment-management decisions. However, if you want to be able to customize your strategy or have a say in picking what securities are included in your portfolio, you may not like that. It’s important to ask how much input you’ll have in your investments to determine whether it’s going to be more of a team or a hands-off relationship.
No matter what your financial goals are, reaching them starts with that first conversation.
With these questions, you’ll feel confident and ready to speak with a John Hancock Advisor about how you can start building your future today.