It's a bit hard to believe - consumers ask far more questions about the car they're about to buy or how their dinner is prepared at a restaurant than they do to their financial advisor. This passive approach often puts some (very) bad eggs in full control and as such they start to view their customers less as fellow humans and more like an endless stream of cash.
To avoid this, it helps to establish a sense of assertiveness. Even if you do not fully understand what you are undertaking, and if you don't understand the financial jargon, asking these questions will show that you've done your homework and you have every intention of "lighting a fire" under your advisor. After all, someone has to keep them accountable and honest!
There will be other blog posts about all the questions you should ask - so stay tuned for those - but I figured it would be most appropriate to start with questions relating to fees. Fees are probably the most important place to start because if a financial advisor can explain their fee structure so that you can understand it, then you can probably understand anything they throw your way.
If there is any funny business going on, you'll know right away after asking these questions. Stick to your guns and make sure you get the answers to THESE questions first before moving onto the finer points of investing:
TOP QUESTIONS FOR FINANCIAL ADVISORS ABOUT FEES
1) How do you get paid for the investments that you recommend to clients?
2) Are you compensated more for some investments than others?
3) Do you get paid commissions on any investments or products that you sell?
4) Do mutual fund companies or investment firms provide you with any incentives to recommend their funds over others?
5) Aside from what you charge as normal payment, what other costs can I expect to incur?
6) Should I expect the fee structure to change over time?
Advisors should always be 100% transparent when it comes to how they are compensated. Not to do so would be a major no-no and to do so dishonestly would be even worse. It is not necessarily a bad thing if an advisor is paid commissions or if they are paid extra to recommend certain mutual funds - but if they are they need to be 100% honest about it and you should be aware of every recommendation they give. Obviously if the do not answer any of these questions to your satisfaction right off the bat - DO NO INVEST YOUR MONEY WITH THEM.
Greetings, GradMoney Readers!
October 22, 2018
Which City Has the Richest Population?
September 12, 2018
CSRIC Fun Facts: Trees & Pollution
October 24, 2018
Search By Tags
I'm busy working on my blog posts. Watch this space!