Your advisor looks after your dad’s portfolio too; he even attended your wedding. He is, you are a sure, a great guy. Yet you are too shy to voice your anxieties about your investments, your life’s savings. You are too embarrassed to mention to this “fantastic guy” that you are unsettled by the various news reports about the retirement savings industry having let down its customers horribly in the process of spectacularly enriching itself.
In fact, you hardly feel right asking him any questions, even obvious ones, such as what portion of your return he is pocketing.
Does it not seem a little odd that you don’t feel you can discuss your concerns about your finances with your trusted financial advisor?
Without a doubt, there are many services a financial advisor can provide beyond recommending commission-generating products. He might be the reason you have any retirement savings at all, having persuaded you to start saving for retirement early. He might help you with personal or professional tax efficiency, perhaps even filling out and submitting your tax returns every year.
There might be many other examples where an advisor has been beneficial but, whatever the history of the relationship or the perceived value of the services provided, there are questions you should ask your financial advisor.
If you feel embarrassed or otherwise unable to ask basic questions, you should seriously ask yourself why.
Here are some basic questions to ask a financial adviser:
- What are your qualifications? Are you licensed to give financial advice?
- Do you consider yourself a fiduciary? Will you put my interests above your own? Do you have any potential conflicts of interest? What are they?
- Are you an independent or a tied agent?
- Will you be paid more to recommend some products over others?
- How do you plan to bill for your service? At what rate? Are you negotiable?
- What are my total fees? Not just portfolio fees, what is the bottom line total cost?
- What are my upfront/initial fees, financial advisor/broker/wealth management fees as well as admin/platform fees, investment management/fund fees, and are there any performance fees? (Ask for a rand figure rather than percentages ie How many rand should I expect to pay in fees this year?)
- What is my asset allocation? What is the logic underpinning it?
- What level of returns can I expect? Ask for three scenarios: worst case scenario, average scenario and best case scenario.
- What investment vehicles will I be invested in? What are the pros and cons for each vehicle?
- Is my investment tax-efficient?
- What services will you provide (eg tax optimisation, estate planning, insurance advice, financial education)? Will you do a financial plan? How often will you revisit this plan? What report-backs and updates can I expect from you?
- What is your investment philosophy/what are your investment beliefs?
- On what basis do you select funds and fund managers?
And the million-dollar question: Where is your own money invested?
