15 essential questions to ask a financial advisor when planning your retirement
Looking for a financial advisor to help you prepare for your retirement? Sometimes it can seem even more difficult than shopping for a house or a car. Learning how to make money can seem like a daunting task.
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1. What is your financial philosophy?
Money is personal and hopefully you will have a relationship with your financial advisor that will last for years. It is therefore important that you determine whether you are a good candidate ideologically.
It’s okay if your philosophies differ a bit – it could be a learning opportunity for you – but to trust your advisor, you’re going to want to be on the same page on some important things.
2. What services do you offer?
Different financial advisors offer different things. If you need specific services, make sure the advisor can provide it. Depending on your needs, you can request:
3. What professional qualifications do you have?
Each financial adviser will have their particular qualifications. Look for recognized industry designations, such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA).
To sell or recommend specific products, the advisor may be required to pass licensing exams from the Financial Industry Regulatory Authority, more commonly known as FINRA. He or she must also be registered with the state.
4. Who is your typical customer?
Look for an advisor who has experience with clients in situations similar to yours. For example, if you focus on retirement planning, make sure your advisor has experience helping clients plan for their golden years.
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5. Are you a fiduciary?
Some people prefer to ensure that their financial advisor is a fiduciary. This means the advisor is required by law to always act in your best interests.
There are many non-fiduciary advisors who do a good ethical job. However, choosing a fiduciary can provide you with additional peace of mind.
6. How do you make money?
Financial advisors can use a wide range of payment structures. If you choose an advisor who makes commissions, he or she may steer you toward a product that doesn’t best meet your needs.
Instead, you might want to choose an advisor who will charge you a fee for their services. If you opt for a paid financial advisor, find out if this fee is a percentage of your assets or if it comes as a flat rate.
7. Will you provide details of your fees in writing?
If you want to be extra careful, ask your financial advisor to provide you with a written list of all fees and expenses. This way you can avoid any unpleasant surprises. Your financial advisor should understand your desire to be “prevention is better than cure”.
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8. How will we communicate with each other?
Communication is an integral part of any professional relationship. This is especially true when it comes to money. Make sure you are comfortable with the advisor’s mode of communication.
Will your financial advisor primarily call you or receive email messages? Or maybe your advisor prefers to meet with you in person. Check it out and make sure it fits your communication style.
9. How much money do I need to retire?
For most people looking for financial advice, this is the golden question. There is no “right” answer here, as experts have many different theories. But your financial adviser should be able to give you a rough estimate and then explain how they arrived at that figure.
Do you have other personal financial goals that must co-exist with the goal of retirement? Your financial adviser should also be able to help you.
10. When can I expect to retire?
Now that you know how much money you’ll need in retirement, it makes sense that you want to know when you can get there.
There is no definite answer to this, since future returns are unknowable. But your financial advisor should be able to tell you what your retirement timeline looks like based on your particular situation.
11. When should I file my claim with Social Security?
Deciding when to file for Social Security benefits is difficult because the age you choose will impact the amount of monthly check you receive. It’s easy to find general advice online, but your financial advisor should be able to give you a recommendation tailored to your needs and goals.
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12. Do you offer educational resources?
Different people will have different opinions on how involved they want to be with their financial advisor. If you’re someone who wants to learn as you go, ask potential financial advisors how much they offer in terms of educational materials.
13. What kind of tax can I expect to pay in retirement?
Some people fail to factor taxes into their retirement plan, leaving them with a nasty surprise later. Your financial advisor can help you prepare for the taxes you’ll face in retirement.
14. What do you think are the biggest risks facing my retirement?
One of the most important parts of financial planning is considering risk so you can create contingency plans. By asking an advisor about the risks you face, you get an idea of the attention they pay to today’s financial landscape.
If you entrust the responsibility of your retirement to an advisor, you want to make sure that they closely monitor the current and future risks that you face.
15. What will we do if I don’t achieve my goals?
In a perfect world, all financial advisors would provide a guaranteed plan to help clients achieve their goals. However, the world we live in is not perfect.
Your financial advisor should be able to offer you transparency on what they will do if you do not successfully meet our financial goals.
At the end of the line
If you’re not sure where to start on your financial advisor journey, you can find a wide range of reviews online. However, it’s never a bad idea to ask friends and family for their personal experiences – sometimes first-hand recommendations are the best way to start in the right direction.
Once you’ve found the right professional, you’ll benefit from expert help in saving for retirement, learning how to eliminate financial stress, and achieving your other financial goals.
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