Financial Advisor

As an investor seeking a financial advisor, you probably have held multiple meetings prior to making your selection. You may have even searched the Internet for the best questions to ask a financial advisor. And ultimately, you must make a choice. But what is most important?

You have trusted your hard-earned assets and retirement hopes to an advisor, and now you talk quarterly or annually about the S&P 500, the price of oil and interest rates. Perhaps you leave feeling confident in the advisor's intellect and firm capabilities, but what about your financial future and your retirement goals?

“Do you have a risk management plan for the next -40% correction?”
It is amazing that so many investors own luxury autos with anti-lock brakes, air bags, lane change motion sensors and the like, and yet their portfolio has no safety features built in. You have to ask yourself “how much am I willing to lose if the market goes into a correction?”. The buy and hold story that allows you to dollar cost average the equities you purchased at their highs is just a way to emotionally ease your pain but not a real solution.

Here’s a really tough one:  Was your current advisor/broker even in business in 2008?
Over half of Wall Street advisors have less than 10 years’ experience.  If your advisor has been in business over 10 years, ask him the following question:  “Between October 10, 2017, and March 6, 2009, how much of your clients’ money did YOU lose???”  Don’t back down, demand an answer.

Are you invested in mutual funds?
Research from USNews has shown that mutual funds offer the same return as their ETF peers.  Mutual Funds charge higher fees and yet their returns aren’t any better than ETFs.  If you have a $200,000 portfolio, just a 1% difference in fees compounded over 20 years at 7% will cost you over $87,000!
Read more: ETF vs Mutual Funds >>

Using a financial adviser is a smart idea if you are unsure of how to manage your investment portfolio, retirement accounts or don't know what to do with a large inheritance.  However, not all financial advisers are created equal, and some might be trying to line their own pockets with commission-based product sales rather than give you the best advice for your investment and retirement.