Financial Advisors: Interview Questions

These basic questions are a good starting point to understanding any of the financial advisors you may interview or meet.  Let us know if this list was helpful.  Thanks!

PERSONAL

How long have you been in the financial services industry and/or a financial advisor specifically?

Briefly describe your work history.

What is your educational background?

What licenses and/or designations do you currently hold?

Have you ever had any formal client complaints filed against you? If so, please explain.

SERVICES

What services do you and/or your firm offer?

Do you specialize in a particular area?

Please explain your approach to investing and/or financial planning.

Who will provide ongoing service to my account?

If you are unavailable do you have back-up support team?

How often do you perform account reviews?

How many clients do you currently have?

Do you provide ongoing education for your clients?

Will you provide me with your form ADV Part II or the state equivalent?  If no, please explain.

Are you and/or your firm registered at the state and federal levels as an investment advisor?  If not, please explain.

COMPENSATION

How do you charge for your services?

Do you have a business affiliation with any company whose products or services you are recommending?  If yes, please explain.

Do you receive compensation for referring me to other business professionals? If yes, please explain.

In the event of an emergency, how long will it take to get all of my money out of the investment account we have discussed? Please explain in writing.

Do you provide clients with a written letter of engagement? If no, please explain.

Rebalancing Your Retirement Investments:

No one has been sheltered by the latest economic downturn, including your retirement portfolio.  This may be the opportunity of a lifetime to rebalance your investments to take advantage of the future upswing of a recover.

Rebalancing your portfolio should be done with a money manager, financial advisor and/or a financial planning professional, as it is truly a difficult task to accomplish on your own.

You can do most of the leg work first, however, by evaluating your existing investments and assets, then present them to your existing or your newly found financial advisor and discuss what you want to change, alter, or liquidate.

First, why do you need to rebalance?

Typically you need to rebalance your portfolio because of your age, your risk tolerance has changed for any number of reasons (see latest economic crisis), or the relative values in your portfolio have changed and no longer meet your desired asset and risk allocation.

Age
In your late 20’s, you were probably inclined to invest in high risk, high yield, but once you are closer to retirement age, converting most of your assets into more liquid forms will probably be your primary goal.  Deciding and weighing the risks and benefits of these type changes are best suited for a financial advisor who has a diverse client base and a varied background of experiences to draw from.

Risk Tolerance
Again, when you were younger and still had a long-term time frame to invest for retirement, you were willing to tolerate higher risk. On the other hand, an investor in their 50’s who is counting on using their retirement fund as a reliable source of income might not be comfortable with a large decline in their portfolio’s value, even for a short period of time. It’s time to lower the perceived risk.

Asset Allocation
There are really only two choices to rebalance your portfolio’s asset allocation: either make direct adjustments by reallocating funds from one asset class to another (as you grow closer to retirement age you may divert some of your stocks and properties into something more liquid), or add new stable investments (such as bonds or cash) to the portfolio.

Any number of high-quality money management advisors within our independent directory ( All Financial Advisors ) can help.  Maybe selecting 2-3 to talk with before you make your decision; will help you get a feel for each financial advisor’s experiences, background, credentials, client to advisor ratios, etc. 

We hope this helps!

Important Beneficiary Designation Considerations

Although you may have a formal estate plan established with a trust or will — make sure beneficiary designations on all accounts are consistent with your goals. 

Accounts having beneficiary designations will control who receives the assets.  Common assets with beneficiary designations are:

• Annuities
• Individual Retirement Accounts (IRA)
• Life Insurance
• Qualified Retirement Plans (401K, 403b, 457, SEP, SIMPLE, Pension, ESOP)
• Employee Benefit Plans (Group Term Insurance, Stock Option, Stock Purchase, Non Qualified Retirement Plans)
• Transfer on Death (TOD) Accounts

Additional items to consider:

• Update designations for life events such as birth, death, marriage and divorce.
• If you make changes to your will or trust ensure beneficiary designations are up to date.
• Name contingent beneficiaries
• Use caution when naming a trust as beneficiary, get a legal opinion from a estate planning professional
• Consider naming a charitable organization as a beneficiary

Beneficiary designations are a powerful tool allowing for efficient transfer of assets to heirs.  Consult with an estate planning specialist to ensure beneficiary designations have been recognized and completed throughout all assets.

Contact a qualified estate planning financial advisor within our free and secure directory — to discuss your exact needs.  SEARCH HERE.

Thanks for using AllFinancialAdvisors.com

401K and 403(b) Plans Explained

Company sponsored retirement plans, such as the 401K, are becoming an increasingly important component of the retirement planning process.

Has your current financial advisor explained to you the various components of your 401(K) or 403(b) plan?

401(K) plans are one of the most common retirement plan types. A 401K plan offers eligible employees an opportunity to establish an investment account and allows the employer to deposit funds deducted from employee paychecks. Once deposited into the account most plans offer a variety of money management choices such as mutual funds, stocks, bonds, and cash. At the employers discretion a plan can operate pre-tax as a Traditional 401K or post-tax as a Roth 401K.

Additionally, employers have the option to make contributions into employee accounts in the form of matching contributions (for active participants only) or non-elective contributions (all eligible employees receive same contribution).

Collectively, these contributions can add up to a substantial amount and creates a tremendous amount of tax savings.

Just to clarify, a 403(b) plan is also a qualified retirement plan that is offered to employees of hospitals, higher-education institutions, and non-profit companies and organizations.  Each 403(b) plan can be compared to various 401(K) plans, because they share similar characteristics: i.e. contribution limitations, various tax exempt rules, withdrawal penalties, and investment alternatives.

It is highly recommended to conduct an annual review [at the very least] of your company’s retirement plan with your financial advisor or financial planning firm — to learn how to get the most out of your plan.

Thanks for visiting AllFinancialAdvisors.com & we hope this article helped.

What’s the difference between Fee-Only and Fee-based Financial Advisors?

There are many things to consider when deciding to hire a financial advisor.  Perhaps the most important consideration, however, is how a financial advisor gets paid.

AllFinancialAdvisors.com recommends finding out how an advisor, wealth manager or financial planner is to be compensated; via a “Fee-Only” arrangement, or as a fee-based financial advisor or as a commission-based broker.

There is a subtle but important difference between “Fee-Only” and fee-based: A fee-based financial advisor can receive compensation from you and from third parties (mutual fund companies, insurance companies, investment firms or brokerages).

Any time a financial advisor is being paid by someone other than you to give you investment advice; you can’t be sure whether he/she is acting in your best interests or just selling you the products that will best fill his/her own piggy bank.

A Fee-Only financial advisor, on the other hand, cannot accept fees from anyone but you.  Those fees can take the form of an hourly rate, a percentage of the assets managed on your behalf, a flat fee, or a monthly retainer. What’s more, Fee-Only registered investment advisors (RIAs) must uphold a fiduciary responsibility to you. That means they are bound to recommend only those investments that are right for you (and which are less expensive to own).

The bottom line is this: Fee-Only financial advisors have your best interests in mind at all times.  Their loyalty lies with you, not with a company whose products may be completely wrong for your financial goals.  And being able to trust your financial advisor will give you the peace of mind that comes with knowing your money is well taken care of.

You can find many high-quality Fee-Only financial advisors right here at AllFinancialAdvisors.com.

Many experts recommend interviewing 2-3 different financial advisors, so that you can compare and contrast each individual and firm’s background — in order to make the best qualified decision for you and your family.

Fiduciary Duty (defined by Wikipedia):  A fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary ().

Investing With A Conscience: Faith-Based And Socially Conscious Investing

If you want to put your money where your ideals are, you’re not alone: More people than ever are following their consciences and their faith when it comes to investing.

In fact, socially conscious and faith-based investing currently accounts for a little over 10% of the U.S. investment marketplace.

The prospect of following through on your commitment can be daunting, though. Where do you start? How do you know which companies are in line with your ethics–and which ones are supporting, either directly or indirectly, activities that conflict with your beliefs?

Begin by evaluating every company, mutual fund and portfolio that catches your interest as a potential investment.  You’ll want to look for things they’re doing that are in line with your values, as well as for things they’re doing (or not doing) that conflict with your beliefs. For example, do they own any part of any operation that is harmful or oppressive to vulnerable populations (or to anyone, for that matter)?  Do they support clean technology and conflict-free goods? Look at their financials and see where their money goes.  When they’ve met your criteria, look for one more thing: Are they profitable?

There are other ways to invest in a brighter future.

You might also consider community investing, where you can invest capital in small businesses that serve low-income populations; in businesses and individuals in communities that are not well served by the financial services sector; and in community banks as an alternative to large, multinational banks. You can even choose to take part in making micro-loans available to start-up businesses in developing countries through organizations like FINCA® International.

If you’re solely interested in supporting companies and investments that do not conflict with the basic tenets of your faith, the process is basically the same as outlined above for social investing. In your due diligence, check to make sure a company and its supply chain do not invest in or support any activities that are in opposition to your beliefs. Because so many people today want to invest in line with their faith, there are a wide range of faith-based financial advisors, mutual funds and money managers to choose from. As with socially conscious investments, make sure your faith-based investments are profitable and offer the degree of risk acceptable to you.

Socially conscious and faith-based investing is a rewarding way to grow your portfolio.  It takes additional effort though, and only you can determine is it worth it!  Most people who go this route say: “YES IT IS!”

By choosing to put your money into companies that live up to your ideals, you’re helping to make the world a better place.   And that’s not such a bad reason to invest.

Michael Jackson’s estate was not kept up to date.  A news worth event for fans and the general public alike.

Michael Jackson’s estate plan included a will… in conjunction with a family trust.  Unfortunately, Michael Jackson’s will was missing vital information, beneficiary designations!

When this happens, this critical estate planning omission temporarily disqualifies the originally appointed administrator and executors from exercising their powers to privately settle the estate. 

As a result, the estate now must be exposed to the state probate system; the state probate will then determine who gets control over the estate and make many of the proceedings public record.

Mrs. Katherine Jackson, Michael Jackson’s mother, was one of the original administrators of his estate.  She was apparently in various disagreements with two of Michael Jackson’s former business colleagues, an attorney and a recording label executive.  Michael apparently appointed them as his executors, when he established the estate plan in 2002.

Any individuals like these type business persons, would obviously be interested to gain immediate control over the estate for business purposes.  You can see how the viewpoints of a mother mourning the loss of her son could differ from two businessmen awaiting to take control of her son’s estate. 

Estates with multiple administrators and/or executors who have differing agendas can become very difficult to settle, expensive and emotionally taxing.

This is a great example of why it’s important to keep an estate plan updated.  Additionally, be very careful and ask lots of questions before deciding who will handle your affairs.  Not all financial advisors are equal in their experience and/or education. 

Don’t let your estate become a “Thriller”…

IMPORTANT QUESTION:
Who will take control of your estate plan when you are gone? 

Choosing 2-3 qualified Financial Advisors with Estate Planning expertise — may be the way to go!  That way you can interview them to see if they have past clients with similar estate planning issues that you have.  Just a thought…

Setting Your Financial Goals

Goals are the foundation of your financial plan!  Without knowing exactly where you want to go, you can’t take any action.  Setting financial goals gives you a destination, and your financial advisor can help you get there.

If you’ve never set financial goals, good news: It’s not a mystical, complex process. In fact, it’s fairly simple.  Still, to start with, devote a generous amount of time to sitting down by yourself, with your spouse or significant other and thoughtfully talking about exactly where you hope to go in life.

When considering your goals, think about what you want to accomplish short-term (up to one year), mid-term (one to three years), and long-term (five or more years out).

Short-term goals might include, for example, paying down smaller debts, establishing an emergency fund, or saving for a vacation.  Mid-term goals might include saving for a child’s orthodontia or a new car, starting a business, or paying off bills. Long-term goals could include saving for college and paying off a mortgage.  The goals are all yours, so take a close look at your life today and dream about where you want to be in the future.

As you’re coming up with goals, write them down.  Don’t worry about the order for now; just get them all, from the smallest to the largest, on paper.

Once you’re sure you have all your goals written down, it’s time to prioritize.  Decide which ones are the most important and which of the short- and mid-term goals need to happen in order for you to reach your longer-term goals.  If they seem too big and lofty, break them down into smaller, more realistic steps, and prioritize those.

Next, figure out how much money each goal will take.  This step may look daunting, but don’t get discouraged.  Remember, your goals are only the first step to creating a comprehensive financial plan that will allow you to reach them.

You’ll also want to realistically calculate how much time each goal will take to achieve.  Give yourself plenty of time for each one: You don’t want to underestimate how long it will take you to reach your very first goal and feel defeated early on.

Will you need to change any habits or behaviors to reach your goals?  Many people will.  Write those down, too.

Then comes the good part:  Work with a financial advisor to come up with a plan to achieve your goals.  This will be your roadmap.  Review it regularly (at least twice per year) to make sure you are still on track. As you begin reaching some of your short-term and mid-term goals, revisit your goals and your plan. Life inevitably changes, and a good financial advisor will help you keep your plan flexible and workable.  Best wishes!

Our Top Ten List:
10 Signs You Need a Financial Advisor

# 10. You’re planning to start a college fund for your kids . . . and they’re already in high school.

# 9. You’ve been talking about taking that big vacation for five years, but you still haven’t saved any money for it.

8. You can only seem to budget an average of about $91.50 in savings every month.

7.  Your cousin Jim-Bob has a hot lead on an investment that’s (almost pretty much for sure) going to double your money overnight—and you’re seriously considering it.

6. You’ve been pushing out your projected retirement date for so long, that you’re now planning to be able to retire when you’re 85.

5. You were going to refinance your mortgage to get a better rate, but then you found out you could pull out some equity, so you did . . . and now the cash is gone, your house won’t be paid off for another 30 more years, and the payment is the same as it was when the interest was higher.

4. You hadn’t really thought about saving to replace your car (until it broke down yesterday).

3. You haven’t had a good night’s sleep in four years, because financial worries are keeping you awake at night.

2. You don’t know what a diversified portfolio is… and you figure it’s your diverse set of toys in the garage… skis, bikes, other diversified ‘stuff’ you own. Huh?

(drum roll in the distant background, please…)

and the #1 Reason is… The only financial goal you’ve ever set is to make it all the way to your next paycheck without having to take out a ‘pay-day’ loan…

ALL RIGHT, we admit these are ”tongue-in-cheek” reasons, BUT if any of them hit a little too close to home…, it’s probably time to start looking for 1 or 2 financial advisors to choose from (or a financial planner) – to help get you moving in the right direction. 

Some financial advisors and financial planners will work out special arrangements for your first consultation or provide advise and planning services via an hourly fee.

The best time to ACT is NOW!  Get started by putting your Zip Code in the search box above to begin reviewing the high-quality financial advisors near you.  It’s Easy & FAST to search within the AllFinancialAdvisors.com database. 

Our FREE and SECURE service will match you with several Fee-only or fee-based financial advisors who are right for you!  Thanks for visiting, have a good weekend & we look forward to your comments.