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Early in her career, Certified Financial Planner Lynn Ballou received a strange question from a potential client: “What type of car do you drive? ” He asked. She drove a humble Honda Civic and he, at first, was not impressed: “He told me he drove a Mercedes and that if I didn’t drive a car at least as pleasant as his, then he would. asked whether or not I was good at planning, ”says Ballou, who is now senior vice president at EP Wealth Advisors. After laughing about it and telling the customer that he should be happy that she drives a cheap, reliable car because that meant she was putting into practice what she preached to spend more on what mattered to her ( not for cars), says Ballou with a laugh: “He ended up hiring me but spent many years trying to convince me to upgrade my car. Use this tool to find a planner that meets your needs here.
While this may be an obvious question not to ask, others are less so. Here are four questions that at first glance may seem useful to you, but probably aren’t as helpful to help you verify the advisor as you might think.
1. How many clients do you work with and how many accounts do you manage?
More is not necessarily better, and neither is less. Just because an advisor has a ton of clients doesn’t mean they’re great, and fewer clients doesn’t mean they’ll have more time to spend with you. “It is important to understand the bandwidth available to your financial advisor, however, due to technology, bandwidth is not totally dependent on the number of clients or accounts managed. As many advisors can attest, sometimes a client with a very small account can take significantly longer than ten clients with multiple accounts, ”says Charles Weeks, chartered financial planner and founding partner at Barrister.
A better question: Can you walk me through your client process and explain what I can expect from you if I decide to work with you? Use this tool to find a planner that meets your needs here.
2. What are your assets under management?
Focusing on assets under management can be misleading. “Just because an advisor has a lot of assets doesn’t necessarily mean it’s right for you. Most clients these days are looking for comprehensive financial planning or maybe specific advice on a topic like unrealized capital gain, ”Weeks explains. So just because an advisor is managing a few hundred million dollars doesn’t mean they can help you with your needs.
Best questions: What investment references do you use? What asset allocation will you use for me?
3. What is your past performance like?
This question is often not very helpful because different clients have different needs – some may want rapid growth, others more secure and slow and steady growth. “The idea here is that investors should focus on building a diversified portfolio based on their risk tolerance and goals. Cashing in on past performance is not the recipe for success. Making steady progress towards your goals is always more important than short-term performance, ”says Amy Richardson, Certified Financial Planner at Schwab Intelligent Portfolios Premium.
A better question: Can you tell me more about your investment philosophy?
Use this tool to find a planner that meets your needs here.
4. What are your market forecasts?
Weeks says, “Unfortunately our crystal ball is as good as yours. If by any chance your advisor offers you a market forecast, or worse, if he guarantees them, run for the hills and don’t look back. Your advisor should tell you that they will work with you to determine your risk tolerance, create an investment policy statement, and invest accordingly. “Based on that information, they can check your allocation and give a general idea of what returns might look like over the next decade,” Weeks explains.
A better question: How will you manage my money during the ups and downs of the market?