Delegating your investment decisions to a financial advisor can feel like relief, especially if you’ve felt worried, anxious, or fearful about the stock market or making money decisions in general. The good news is you don’t need to memorize the tax code or speak fluent finance to get real value from your advisor. You do, however, need answers to a few questions to maintain peace of mind. Does your advisor bring clarity to your financial situation, or do you feel more confused? This single question can reveal a lot about the effectiveness of your relationship with your advisor.
Here are a few more questions you want to be sure you can answer this year that will give you confidence that you are working with the right financial advisor.
Is my advisor acting in my best interest?
A fiduciary is legally required to put your interests ahead of their own. That means they cannot steer you toward a product simply because it offers them a higher commission. However, it’s important to note that some professionals may act as fiduciaries only at certain times and operate as salespeople at other times, depending on their role or “hat” for the day. If you ask, “Are you a fiduciary?” A dually registered advisor is both a broker (registered with FINRA) and an investment advisor (registered with the SEC). A broker is not legally required to act as a fiduciary, only and always in every recommendation they make. If you don’t want to ask your advisor the question directly, you can look up registration status at FINRA BrokerCheck (https://brokercheck.finra.org) and SEC Advisor Search (https://www.investor.gov/).
How does my financial advisor really know if I’m on track to reach my goals?
A financial plan isn’t a binder that sits on a shelf. It’s a living thing that should give you confidence to know you are going to be okay.
Before you talk about returns, does your financial advisor ask what’s new? Have your goals changed since last year? Do you want to retire early? Are you planning a move? Did you have a health scare? Are you quitting your job to start a business? Life changes, and your plan should shift with it. While your financial advisor may tell you that you’re on track for retirement, can they explain how they reached that conclusion? Do they instill the confidence you need to buy a second home or take that dream vacation? The goal is to provide you with meaningful insights about the life you are building, not just a review of investment performance compared to some benchmark you’ll forget by dinnertime.
What fees am I actually paying?
There are three basic models for financial advice. Commission-based advisors earn money when you buy a product. Fee-based advisors charge a fee and can earn commissions, which is easy to confuse with the next one. Fee-only advisors are paid directly by you and only by you, with no commissions or product sales in the mix. Fees are the quiet drag on your returns, and they hide in more places than most people realize. If you’re working with a fee-only fiduciary who bills on the assets under management, you can see the advisory fee on your custodian’s statement (Schwab, Fidelity, etc.). Then there are the fees you can’t see: expense ratios in your mutual funds and ETFs, 12b-1 fees, commissions, trading costs, and platform charges.
If you add up everything, what percentage of your money goes to costs each year? A fee-only fiduciary should be able to easily explain what you’re paying, while some other advisors may struggle. If you’re concerned, ask them to explain it in one plain sentence. If they can’t, that’s your answer. You’re not looking for the cheapest option, but you do want value you can see clearly.
Does my financial advisor consider taxes?
Two investors can earn the same return and end up with distinct net results. The difference is often taxes.
How often does my financial advisor reach out to me?
The best plan in the world can fall apart if your advisor doesn’t follow up to see how it’s going. How often do you meet to make updates? When was the last time you heard from your financial advisor, or do you always have to be the one to call? Would someone pick up the phone if you felt worried when the market drops 15%, or would you disappear into a call queue? Your financial team should know your situation personally. You’re not just an account; you are a highly valued client, and their desire to stay connected shows how invested they are in your success.
What happens to my plan if my advisor retires?
If you work with a financial advisor throughout retirement, chances are your financial life will outlast any single advisor’s career. You want stability and confidence knowing that your accounts and financial plan are solid, even if your advisor retires, leaves, or gets hit by the proverbial bus. Does the support team already know you, or is everything in one person’s head? Firms built around a team share notes, clear processes, and have multiple advisors who understand your goals to provide continuity that a solo operator simply cannot. Your plan should be built to keep working, no matter who’s in the room.
You don’t need perfect financial knowledge to make a smart decision. You need an advisor who answers questions in plain English and leaves you feeling more confident than when you walked in. At Hurlow Wealth Management Group, we’re a fee-only fiduciary firm, which means your interests come first every time. If you’d like to talk through any of these questions, we’d love to hear from you. Feel free to schedule an introductory call with one of our financial advisors. For over two decades, the Hurlow Wealth Management Group has helped clients achieve their financial goals by creating clarity around priorities, feeling confident to make decisions, and ultimately achieving comfort.
