What to do before talking to a financial advisor?
Be prepared to talk about your income, regular expenses and monthly cash flow. Provide a summary of your debt—including your mortgage, credit cards, student loans, car loans and other debt—and the interest rates and terms on the loans. Provide your insurance and estate-planning documents.
Be prepared to talk about your income, regular expenses and monthly cash flow. Provide a summary of your debt—including your mortgage, credit cards, student loans, car loans and other debt—and the interest rates and terms on the loans. Provide your insurance and estate-planning documents.
- 401(k) and other investment plan statements.
- Mortgage and other debt statements (Hint: You shouldn't start investing until you're debt-free, besides the house.)
- Pay stubs for you and/or your spouse.
- Your most recent tax return.
- Your monthly budget.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
It might come as a surprise, but your financial professional—whether they're a banker, planner or advisor—wants to know more about you than how much money you can invest. They can best help you achieve your goals when they know more about your job, your family and your passions.
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
- Your values about money and your vision for your future.
- What life events are happening or could potentially happen.
- Short- and long-term life and financial goals.
- Investment questions.
- Your current financial situation.
Should you tip your financial advisor? No. You definitely want to understand all the different ways you're advisor is getting paid, from whom and how much you're really paying him/her. Once you know, you'll understand tipping is inappropriate.
A good advisor always starts by identifying your goals — even your hopes and dreams — and then turns that understanding into a personalized financial strategy that can help you make those dreams come true.
The 80/20 rule retirement emphasizes the importance of focusing on actions that yield the most significant results. When planning for retirement, concentrate on the 20% of your efforts that will have the greatest impact on your financial future.
How many times should you meet with your financial advisor?
You should meet with your advisor at least once a year to reassess basics like budget, taxes and investment performance. This is the time to discuss whether you feel you are on the right track, and if there is something you could be doing better to increase your net worth in the coming 12 months.
Generally speaking, financial planners address and keep tabs on multiple areas of their clients' finances. They develop long-term, strategic plans in these areas and update them on a regular basis over the years. Financial advisors tend to focus on specific transactions and short-term situations.
It is risky to give your bank account login ID or password to a financial advisor or anybody else. Note that your advisor might be able to see your checking account and routing (ABA) numbers when you establish online transfers.
You may be asked to provide financial documents such as: Bank statements. Investment statements. Insurance policies.
Savvy financial advising clients will have a lot of questions for their advisors, but two of the most common ones are "are you a fiduciary?" and "how do you get paid?"
Red Flag #1: They're not a fiduciary.
You be surprised to learn that not all financial advisors act in their clients' best interest. In fact, only financial advisors that hold themselves to a fiduciary standard of care must legally put your interests ahead of theirs.
- Visit FINRA BrokerCheck or call FINRA at (800) 289-9999.
- Or, visit the SEC's Investment Adviser Public Disclosure (IAPD) website.
- Also, contact your state securities regulator.
- Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.
- Suze Orman.
- Jim Cramer.
- Robert Kiyosaki.
- Ben Stein.
- Charles Ponzi.
- Bernard Madoff.
- FAQs.
- The Bottom Line.
Financial advisors are most concerned about business development. Nearly 80% cite the challenge of finding “ideal” clients (Exhibit 1). While an “ideal” client will vary among financial advisors, sourcing them instead of less preferred clients is a big deal.
Have the Conversation. You don't have to meet in person or have an emotional goodbye, but advisors say they appreciate the heads-up of a short email or phone call. "Any sort of ending of a relationship is well served by a recitation of 'It's not you, it's me,'" Nolte says.
What information should I bring to a financial advisor?
- Most recent federal tax return.
- Pay stubs.
- Information on expected income, such as a year-end bonus.
- Latest Social Security statement.
- A list of your investments and cash accounts.
- Retirement plan statements.
- Documentation of mortgage and property tax payments.
They'll ask a number of questions to get a better understanding of your life – money, family and personal goals included. Don't be afraid disclose information about your assets, such as cash flow and investments. Additionally, be open about any debt you may have accumulated.
Experts say it makes sense to hire a financial advisor in the following circ*mstances: You don't have the time or inclination to manage your finances. You experience a major life event, such as a marriage, divorce, loss of a spouse, birth of a child, relocation or change in your employment status.
Ultimately, there's no one-size-fits-all answer — some people, like those who tend to be more experienced, knowledgeable and disciplined might work better with an hourly fee adviser while others are probably better off having a pro mind the shop.
The short answer is that they could be, depending on how an advisory firm structures its fees. There's no guarantee that negotiating will work, though there are other things you might be able to do to save money when hiring a financial advisor.
