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Talking to a Financial Advisor? What to Know

Meeting with a financial advisor requires some preparation. We cover what you need to do before you talk to your professional.

Before you talk to a financial advisor, you’ll want to have your ducks in a row. This includes looking at your situation, assessing your goals and risk tolerance, and understanding just how much professional advice is going to cost. This will ensure that they’re able to provide you with the guidance and expertise necessary to reach your objectives.

Here’s everything you need to know before meeting with one of these professionals:

Nick Lyons, a CFP at The Goff Financial Group, offers tips for meeting a financial expert.

1. Your Goals

Your wants and needs determine the nature of your relationship with your financial professional. To get the best out of it, you’ll have to figure out what you aim to accomplish soon or even decades from now.

Building a nest egg for retirement, starting a business, or putting together a valuable investment portfolio are all common goals. But they typically require different skill sets. Some advisors are better for managing investments, while others will help you plan various areas of your finances. You’ll have to work out what you want and, ultimately, this will inform the expertise you need.

2. Type of Professional You Need

The financial advice industry is chock-full of acronyms and professional labels — CFAs, CFPs, CPAs, RIAs — the list goes on and on. Each one serves a different purpose and can help you in specific ways. CFAs (chartered financial analysts), for instance, offer very technical investment analysis and advice. CFPs (certified financial planners), conversely, provide holistic planning services and could help you with a range of goals, such as buying a home or starting a business.

Titles aren’t the only way advisors vary, though. How they earn compensation is another factor to keep in mind. Some are fee-based and only make money from the services they provide. Others are commission-based and may get paid by recommending products and providing advice. Fee-based advisors are usually the ones you’ll want to go with, though, as these follow a fiduciary duty and avoid conflicts of interest.

If you prefer to avoid one-on-one meetings or the often expensive fees that come with human experts, you may consider a robo-advisor. These services automatically pick investments and rebalance your portfolio according to the information you provide.

After spending some time thinking about your aspirations, you’ll be able to narrow your search more easily and pick one that aligns with your targets. For a more complete walkthrough on picking the right one, we recommend reading our article about how to choose a financial advisor.

3. Current Finances

Your first meeting with a financial advisor typically consists of them asking you questions or helping you assess your goals. To make this process more straightforward, it’s helpful to take inventory of your current situation. A good place to start is asking yourself these questions:

  • How much do you make per year? Consider your annual salary and income from assets, such as rental properties or stock dividends.
  • How much do you have in savings? This would be money sitting in savings accounts through your bank or retirement accounts like IRAs or 401(k)s.
  • What are your debts? This may include your mortgage, car payment, credit card debt, etc.
  • What types of assets do you have? Tally up the assets you own. This could include stocks, bonds, real estate, or more.

Once you gather the above, you’ll be able to infer your net worth. Then, your advisor can use this data to discern your financial health, as well as forecast how you can hit future goals.

You’ll want to bring documents your professional can use to understand your finances. These may be bank statements, pay stubs, insurance policies, tax returns, benefits you receive from your employer, or more. Try to bring as much as you can to your initial meeting.

4. Risk Tolerance

How much risk are you willing to take on? This question is a big part of finance and it’s something to consider before seeing an advisory professional. A certain amount of danger exists with any investment, but you can take steps to navigate or mitigate it.

Ask yourself whether you prefer more stable gains or if you prefer to take bigger, more speculative swings. Most people are somewhere in the middle, but you probably know how close to one or the other your preferences lie.

Once you understand your risk tolerance, you and your advisor will devise a plan that works for you. If you’re unsure, they may ask questions to help you figure it out.

It’s not uncommon for opinions on volatility to change over time. For example, you may start more willing to take bigger risks. But, as you’ve built up your portfolio or gotten closer to retirement, you may pick safer investments to protect it.

5. Advice Isn’t Cheap

Financial advice comes at a premium, especially from experienced professionals with decorated résumés, which are often the best to choose from. Depending on your advisor’s payment structure, you could part with hundreds or even thousands for their services.

Even so, financial advisors can provide relief that your portfolio is on the right track. Before picking one, it’s always worthwhile to compare the market and find one with the fee structure and services you require. Matching tools such as this one can help streamline the process and present you with nearby options.

6. Questions

Asking questions during your first meeting can help you and your advisor be on the same page. Therefore, you’ll want to compile a list of questions to bring and potentially ask. Here are some examples:

  • Are you a fiduciary? These trusted professionals put your interests first and practice with a duty of care.
  • What are your credentials? Look for titles such as Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), and Registered Investment Advisor (RIA). These are typically bound by fiduciary duty.
  • How many years of experience do you have? Advisors with more experience will have worked with diverse clients and may have more investment tactics up their sleeves.
  • What investment strategies do you use? Everyone has their preferences. This can ensure you and your advisor align with how you want to allocate your assets going forward.
  • How do you make money (fee- or commission-based)? This can tell you how much you can expect to pay. Fee-based advisors are also usually fiduciaries.
  • How often will we meet? This can help you work out an appointment schedule that matches your needs.
  • How many clients do you serve? Asking this can tell you how spread thin your advisor might be. However, it could also tell you that many people trust them.
  • Can I see your Form ADV? This form, which advisors must file with the U.S. Securities and Exchange Commission (SEC), discloses their compensation.

These aren’t the only questions to ask during your meeting. But they can begin to illustrate who you’re working with and how your relationship will take shape.

Frequently Asked Questions

What should you avoid when hiring a financial professional?

Since everyone has different needs and situations, this can vary. In general, you’ll want to avoid financial advisors who earn money from commissions or seem like they’re withholding information from you. Similarly, steer clear of experts who aren’t fiduciaries. Your advisor should be someone you trust to deliver unbiased, professional direction. Don’t settle for someone whose business practices don’t match your standards.

Should you tell your advisor everything?

You should tell your advisor as much as you can about your financial situation. Leaving anything out could make it tough to construct a worthwhile plan. Discussing topics such as your debts are useful in getting you to where you want to go.

Do financial advisors look at your bank statements?

It’s not uncommon for advisors to examine several financial documents, including your bank statements. They may also look at insurance information, investments you have, tax documents, and more. These all work together to illuminate your situation and allow them to calculate your assets and liabilities.

Are conversations with finance experts confidential?

Many professional designations, such as CFAs and CFPs, require confidentiality. The only exception is if you engage in criminal activity or specifically allow them to release information. Moreover, you should expect your advisor to be forthright with you about how they use your information or collect it for their records.