You may know all the questions you should be asking your financial advisor (if not, read our story on the questions to ask here), but did you know a new advisor should also be asking you questions? “I tell clients and prospects it is like going to the doctor and taking a full physical exam. I like to call it a financial physical,” says Grace Yung, a certified financial planner and managing director at Midtown Financial Group. “When I meet with new prospective clients, as part of making an overall financial plan, there are several questions that I ask.”
Indeed, you’ll want an advisor to look at your finances, and then get to know you. The financial advisors we spoke to all said that questions are a good way of fully understanding a client’s needs, setting ground rules, establishing trust and learning whether you two will be a good fit. Here are six questions financial advisors may want to ask clients to get to know their financial goals, expectations and more.
1. What was your experience working with advisors in the past like — and what would you like this experience to look like?
Keith Moeller, wealth management advisor with Northwestern Mutual in Minneapolis, says this is a great way to uncover what has worked well for a prospective client and what hasn’t, and what they want moving forward. “This question helps the client verbalize what they’re looking for and it gives the advisor a sense of their expectations and provides an opportunity to help the client understand what they should expect from an advisor,” says Moeller. Indeed, some clients may only want help with specific issues, like investing for retirement, while others may want a more holistic approach.
2. What are your short-term and long-term goals?
When building strategies for clients, Yung says it’s important to know what the short-term and long-term goals of clients are. “Of your invested funds, when will they need to tap into the account to meet various goals? This is important to note because some strategies are better off if they don’t get interrupted prematurely,” says Yung.
3. What does success in retirement look like for you?
“I want to know where their head is at when it comes to the things they will actually be doing in retirement,” says Jeremy D. Shipp, certified financial planner and founder and investment advisor at Retirement Capital Planners. “If we don’t have an ultimate goal towards which to plan, it makes it almost impossible to get started,” says Shipp.
4. How do you respond to big market downturns?
Brian Walsh, senior manager and certified financial planner at SoFi, says understanding someone’s tolerance and ability to handle risk is an extremely important aspect of an investment strategy. “For years, advisors have leveraged risk profiling questionnaires and software to aid this decision,” he explains, adding that specifically, he now asks clients how they responded to the big market downturn last spring. “If they sold or were extremely stressed about the downturn, then they might need to be more conservative,” says Walsh.
5. What type of portfolio risk are you willing to take — and what are your expectations for your portfolio?
Questions four and five are somewhat related, but represent such an important concept to get at that it’s not a bad idea for an advisor to ask it multiple ways. “It’s not just a simple question of are you aggressive or conservative. If you invested $100,000 and tomorrow the market pulled back and your investment is now $80,000, how would you feel?” says Yung. If someone says they wouldn’t be okay if they lost anything, Yung says she’d have to then discuss expectations. “Some people expect to receive 10%+ returns, but they don’t want to take any risk. Risk and reward go hand in hand,” says Yung.
6. What did you do with the money last time you got a raise or came into some extra money?
Looking at how people handle extra money can help you figure out how better to plan for them. “Saving raises not only allows you to invest money for the future, but it also controls the growth of your expenses so you will need to save less money to replace your standard of living when you retire,” says Walsh. If you’re dealing with a person who is a spender, you may need to build extra safeguards into their financial plan to ensure they stay on track; it’s best to know this upfront.
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