Test Your Financial Advisor’s Loyalty with These Simple Questions

You have a financial advisor in order to make certain you have budgeted your money correctly, have planned for future financial needs, and, in some cases, to turn some of your money into more money. 

Your financial advisor is not working for free. He or she is charging you for their services. You need to know that what they are charging you is appropriate for the services you are receiving. 

There are ways to make certain you are being treated well and your money is being cared for by your financial advisor.

First, ask them. The question (“Are you really on my side?”) is in your mind for some reason. Let your advisor know that the question is rattling around in your brain.

Take your monthly statement into your advisor’s office and ask what all those charges mean, and what you are paying for. Make sure you understand what you are being told. If the advisor answers politely and you understand the answers, you can leave happy.

If the advisor is offended by the question, you might want to reconsider the relationship. Every client-advisor relationship is built on some foundation of trust. You want to know how sturdy yours is. 

Throw the word “fiduciary” at your advisor: A fiduciary is defined as an advisor who by law puts the interests of his client ahead of his own and those of his employer.

There are advisors who are required to act as a fiduciary, such as registered investment advisors and certified financial planners, but most are not. Most advisors will say they operate with their clients’ best interests at the top of their mind, which is what anyone would say when asked. But that’s not quite the same thing as being an actual fiduciary.

Be ready to point to key categories on your account statement and ask whether you need to be paying for that service, and how you are benefitting. Again, a worthy advisor will be glad to answer your questions.

Communication is key

Ask others. If you have a financial advisor, it is likely your friends or colleagues have a financial advisor. If there is something in your advisor relationship that worries you, ask others whether they have the same concerns.

If not, you might want to wonder why you do.   

Request more frequent communication. Other than rate of return, the No. 1 complaint about advisors is that they do not communicate well or often enough. If you are wondering whether your portfolio is responding to current events, that means your advisor has not told you whether it is.

Demand more frequent calls, emails or texts. Assuming your advisor is on the up-and-up, he or she will be glad to increase their communication habits for you.

Finally, raise your expectations. You should be comfortable with your advisor. If you are not, heighten your expectations of your advisor’s performance.

Be blunt. There are a lot of advisors out there and you should find one that will meet your expectations in terms of performance, communication and interest in your life and your financial issues. Advisors face questions about their motivations all of the time.

The good ones anticipate those questions and will do whatever they can to reduce your stress and concern.