7 Questions to Ask Your Financial Planner
In today’s world, now more than ever, it’s important to have a financial plan for yourself and your family. What does that mean exactly?
Whether you work with a financial planner already or are looking to hire one, you need to understand what services they provide and how they can help you. Do you need to plan for future college expenses? Maybe you are thinking about investments and retirement. Are you looking for ways to protect your money from taxes?
A financial planner can offer a variety of services to meet your financial needs and goals. You just need to make sure you have the right one who can address those goals for you.
Read on for some questions you should be asking your financial planner or future financial planner this year.
1. What Is Your Philosophy on Financial Planning?
While on the surface this may seem like a rather generic question. It might even seem like one that a smooth talker could use a bunch of buzz words to answer. Yet, at its depth, this is an important question. Knowing that you share the same philosophies as your financial planner is important.
If you’re new to investing, you might feel like you don’t yet have a defined investment philosophy. Yet, your financial planner should have one. They should also be open to helping you define your own philosophy on investing.
They need to know your comfort level with risk. You need to know how they approach investing on your behalf. It’s important to know that whomever you hire to help with your financial planning that they are willing to hear your philosophy and work with it to reach your goals.
If you ask what is your philosophy on investing and the financial planner can’t easily and comfortably answer the question, they are likely not the right choice for you.
2. What Services Do You Provide?
Many people have the assumption that when they hear the term financial planner, it just means investments. In some cases that’s true. Yet, often a financial planner or financial advisor, (the names are often synonymous) provide many more services than just investing advice.
You want to ask your financial planner to talk you through what type of services they provide for their clients. They may offer services that would benefit you that you had not even realized you needed.
In addition to advice on investing, many financial planners offer advice on saving goals, financial planning beyond investing. They can help with budgets, how to create more savings, help with your taxes, to name a few.
Some financial planners even offer services related to insurances. Some might not actually sell life insurance options, but they could help you find the best insurance to meet your short and long term financial goals.
Often a financial planner can help you set up your estate plan and advise you on setting up a trust to manage your assets.
Make sure you know the breadth of services offered by your financial planner and take advantage of them.
3. What Should I Know About Tax Season This Year As It Relates to My Financial Goals?
2020 was full of challenges and for many, those challenges went beyond the global pandemic and included financial challenges. You might have found yourself unemployed or underemployed. You may have dipped into your savings in ways you had not previously done before.
There were things like stimulus checks and the opportunity to defer student loans payments that happened during 2020. As you prepare your 2020 taxes, it’s important to consider all of your financial picture from the year. Ask your financial planner to evaluate your financial situation and look for pieces of your financial picture that might need to be factored into your taxes.
This is also a good time to evaluate your finances from that last year with the help of your financial planner. Did you meet your financial goals over the last year? Did you save enough money for your future or a potentially rainy day? Are they any changes that should be made to your investment portfolio as you head into the next year?
4. Based on My Financial Goals, Should I Make Any Adjustments to My Financial Plan?
The previous question helps set up the next question to delve into with your financial planner. Once you evaluate your financial picture from 2020, it’s time to consider 2021.
You want to ask your financial planner to go over your investments and financial plan with you again. Consider if they investments and places you have put your money are doing for you what you need them to do. Is it time to make changes in your investment strategy?
Sometimes, no changes are needed. Yet, it’s still important to regularly sit down and evaluate the situation with your financial planner.
Maybe you have had some life events over the last year that have changed or tweaked your financial goals. Perhaps you got a new job and find you have more money to invest. Maybe you have a new child in your family and this child needs to be part of your long term goals for saving.
It always makes sense to ensure that both you and your financial planner are on the same page when it comes to your goals for the future.
5. Where Will My Money Be Kept When I Work With You?
You’ve seen enough news to understand the need for knowing where your money is invested. You certainly don’t want to blindly trust any financial advisor with your money only to find out they have squandered it or stolen it.
You want to know who the custodian is that holds your investments or retirement accounts. This should be a third party custodian to ensure your money isn’t lost to someone who is dishonest.
Ask your financial advisor to spell out where the money you hand over is invested exactly. Ask them to show you how you can have access to see what’s happening with your money.
If your financial advisor is unwilling to share where your money is exactly, that should be a major red flag. You should get regular statements or have an online access portal to see how your investments are fairing.
6. Are You a Fiduciary?
The term fiduciary is one that’s important to learn in the world of investments and financial planners.
If your financial planner is a fiduciary it means they have taken an oath to put your financial interests above all else. This means they can’t make money from another source from your investments.
This prevents a financial advisor, for example, from talking you into investing in a stock portfolio only to get paid from them because of your investment. That scenario creates a conflict of interest that would make their advice untrustworthy.
You want to ask your financial planner if they legally act as a fiduciary 100% of the time. You also want to ask if they are willing to put that into writing for you.
Some financial advisors will be what’s called dually enrolled. So, they can say they are a fiduciary, yet there are times when they get profits from their third party investments. You want to know your financial planner is always giving you guidance and advice that has your interests as the most important consideration.
7. What Costs Should I Expect When Working With You?
Of course, anytime you hire a professional to provide a service for you it’s important to know the cost. It’s the reason you get estimates from the plumber or mechanic and have insurance to cover medical needs.
You want your financial planner to explain what costs you will incur using their services. How are you as a financial planner compensated?
Remember, as a fiduciary their income should come from you. So, what will you pay for from their services and what will those fees be?
There are a variety of ways you might be charged by your financial advisor or planner. You might pay for advice fees. This might be an hourly rate that you pay as a result of meeting with them. You might also pay a percentage from your investments to them as they handle these investments.
If the financial planner provides a specific service like handling your taxes or arranging a budget, they might charge you a one-time project fee.
You might also incur fees from transactions as you make changes in your investments.
Most importantly, you know you will pay for their services. You need to know what those fees will be and how they are charged to you.
Use Your Financial Planner to Plan for Tax Season and Beyond
Finding a well-trained and experienced financial planner can be a huge asset in planning your financial future. They will be involved in many facets of your life, from finances to retirement planning and taxes. It’s important you take the time to get to know them and how they approach financial planning.
If you’re in the market for financial services, at Shore Financial Planning, we can help. Contact us today to set up a consultation to talk about your financial goals. We will be happy to answer your questions about our services and commitment to meeting your financial goals.