When you’re looking for a financial adviser, it can be useful to understand questions you should ask. I’m providing 5 questions to ask your financial adviser to understand if they will provide the high quality service you deserve.
How will we work together?
You’ll want to see a clear explanation of process, starting with understanding your objectives, a research phase and then the presentation of your adviser’s recommendations.
The ongoing service should follow a pattern of communication. Reviews should be undertaken annually and it’s worth asking how they will take place? Does your adviser use online technology or will they visit you? What’s included in an annual review? You should be clear about the components of the ongoing service.
Are you independent or restricted?
It’s important to understand if your financial adviser is independent and can provide advice on the full range of available products and providers, or a limited range like a restricted adviser.
If your adviser is restricted, ensure you understand what the limitations of their advice are and how it could impact your experience.
What are your fees and how are they paid?
A clear explanation is needed here. Most financial advisers use either using fixed fees or a percentage of assets under management. You can understand more about the differences here.
You'll have your individual preference on how you wish to pay fees and depending on your circumstances, it could be worth paying from a pension or investment, your earned income, or your business.
There’s no correct way to charge for financial advice but things that could give confidence your financial adviser is a good fit for you may include
Minimum fees. Financial advisers with a minimum fee will tend to be more profitable and be able to serve you better. A minimum fee indicates there’s less chance you are subsidising lower value clients.
Tiered fees. Fixed fee financial advisers will offer different services with different fees based on the complexity of the work. Financial advisers who charge a % of assets under management as a fee, may charge a different % depending on how much you have to invest. Tiered fees can ensure different clients are charged appropriately.
Reasonable initial fees. Initial commissions for investments used to be very high, but thankfully since 2012 all financial advisers must now charge a fee for investment advice. Some financial advisers may charge an initial percentage fee based on the total investment amount, others may use a fixed fee approach. 3% initial fees aren't unheard of and could be considered unreasonable (in my opinion!).
Do you work with people like me?
Once the financial adviser has got to know you, you can ask if they work with people in a similar position to you. The factors that contribute to a similar service might be
Stage of life. Is the adviser skilled at working with people at a similar life stage to you?
Household income. Tax planning is often similar for households with a similar level of income.
Total investable assets. Others with a similar level of investments will have similar investment solutions.
Employment status. Financial advice for business owners, for professionals, or for retirees will all be very different. A financial adviser is likely to have a specialism with certain types of employment status.
Working with a financial adviser who has a deep understanding of the challenges you’re facing is likely to offer a better service for you.
Can you explain that further please?
If you don’t understand anything your financial adviser says, just ask! A financial adviser is likely to know a lot more about money than you and could assume you have some knowledge.
If your adviser is not willing to answer your questions or cannot explain something clearly to you, this could be a sign they’re not the right adviser for you. Financial advisers should have a variety of ways they can explain financial concepts, including sketches, visual explanations, and stories. If you’re not sure about something, your adviser should be willing to go over it in detail with jargon free explanations.
Summary
There are 100 possible questions you could ask a financial adviser - these 5 will give you a good starting point. Building a trusted relationship with a financial adviser requires openness and honesty. Be sure to ask all the questions you want to, even if it feels uncomfortable. Good financial advisers are always happy to help.