Is it your goal to get a better understanding of your finances this year? While it makes sense to work with a professional who can help manage your money, it’s important that you communicate regularly with him or her, because your financial picture and goals can change over time.
Depending on your situation, meeting at the beginning of each quarter or once every year may make sense. Either way, you can get the most out of your check-ins by preparing a list of questions to ask your financial advisor. Better yet, email your questions in advance, so your advisor can have any necessary documentation or information ready when you meet.
You should walk out of the meeting with a clear picture of where your finances stand today as well as whether or not you’re on track to meet your future financial goals. If you’re unhappy with your current advisor, these same queries can be used to help you hire a new advisor.
What you need to know
– What are the total costs associated with the firm you choose? Financial advisors either work on commission, where they’re paid a percent of each trade or transaction, or are fee-based, where a set fee is agreed upon in advance. Fee Only financial planners are compensated only by the fees their clients pay them. Registered Investment Advisors (RIA)’s are required to act as fiduciaries who base their investment strategies only on the best outcome for the client.
– What is the performance of my account, relative to a relevant benchmark? The benchmark that’s most relevant for you is determined by how you’ve chosen to allocate funds. For example, if your goal is to preserve principal and not take much investment risk, the S&P 500 average of stocks may not be the best benchmark to compare the performance of your portfolio to.
– Am I on pace to meet my retirement goals? Are your existing assets and the investment strategy that is in place on track to fund your retirement? If not, ask your advisor about financial strategy changes that would better fulfill your goals.
– What is my total net worth? By adding up your assets and subtracting liabilities, you can get an understanding of how much you’re worth.
– Should I make any financial strategy changes? If you’re on target, you need to be diligent about sticking with your plan, and if not, your advisor needs to work with you to see if a different investment strategy is needed.
Are you getting your money’s worth?
Taking into account the amount you’re paying your financial advisor, assess whether or not it’s worth the amount of money your investments are netting in a year. In situations where the advisor is getting paid on commission, make sure it does not influence the overall investment strategy they’ve put in place.
At Blankinship & Foster, our fees for wealth management are calculated on a set percentage of assets under management, and we never charge commissions. As Fee-only Registered Investment Advisors, it’s our fiduciary responsibility to ensure the investment strategy we propose is predicated only on your best interest.