You’ve finally decided that you have enough cash saved up that you now want the services of a financial advisor.
You’ve finally decided that you have enough cash saved up that you now want the services of a financial advisor. You have put a short list together of about five and are preparing for your first visit to each one in order to interview them.
It’s important that you find one that will work for your best interests, after all these people will be helping you make big decisions and managing what could amount to a big impact on your life. It is imperative that you find the right person, with that said and done, the following are five key questions you should open with in order to get a measure of the person. Do not be afraid to ask, they will want you to make the right decision for yourself.
1. What is their specialisation within the industry.
Obviously depending on what your final objectives are, you’ve probably already shortlisted people that match those. It would be prudent though to ask this question as you absolutely do not want someone who replies i can do everything, this should set of some form of warning and that person should be avoided. Set out your plans whilst discussing this. Are you at ease with their answers.
2. Are there any possible conflicts of interest?
Most advisors will have other interests and a good decent person will lay out for you whether there could be any conflicting interests as regarding your plan. It would be extremely unlikely for an advisor to turn round and say that there will be conflict of interest. The advisor should then lay out any possible conflicts and explain to you how they would deal with this if at any time they potentially become an issue.
3. How will they be paid for their work for you?
Hopefully, your shortlist of likely candidates will be made up of advisors that charge on a fee basis. You can then go through the fees for any particular transaction and better know the costs beforehand. Ask them to explain them fully so you better understand the whole process. When the fees are expected and payment methods, invoicing etc.
You should really try your best to avoid any advisors that work on a commission basis. This might not be true of ‘all’ advisors, but you have to consider in this instance that if the person is looking towards their own bottom line when advising you on a particular investment package.
4. What makes the investment advice they give better than their peers in the industry?
Preferably when they answer this question they should be able to give you a specific answer, after pointing out any major differences they have compared to others. You’ll want them to show other investments and then explain why they would or would not recommend them, ask them to show their sources the have used to come to any particular decision and importantly what information they gleaned from those sources that persuaded them that their answer is the correct one.
Be prepared to take their answers and then check them yourself later. There maybe other factors they do not consider that you might wish to clarify. If you find they are just quoting a sales pitch and do not have any real answers other than what’s in the pitch you should be wary.
5. What are their qualifications?
Are they fully registered with the relevant bodies governing their industry, are there are consumer protections offered for bad advice. I’ll not go into a list here but it’ll be easy to look up the relevant organisation on the internet for your location, and most will have a portal that you can search to find out whether the advisor is registered with them. Some will also give a rating based on other people’s experience and some will also list any misdemeanours.
The above is just a short example of the main questions you should ask, obviously as you go through the answers other questions will arise. It’s important that at this initial meeting the advisor answers all your questions, preferably with confidence and verifiable facts.
One last thing, as you finish the meeting and are walking away, you should ask yourself who spoke the most during your time together. A good advisor would make sure they know your situation in detail, as such they would also ask you questions, make notes for future reference and even given your further things to think about based on your responses.
Ideally the answer to this question you have just asked yourself is that the time talking was about 50/50 between yourselves. If the advisor spent most of the time talking then he wasn’t listening to your needs and you should probably pass on that one. It’s your money and you will want the best person for the job.