Today’s workers face an entirely different retirement outlook than their predecessors. Gone are the days of employer-sponsored pensions for most jobs. Instead, Americans must take an active role in planning for their own retirement. In this environment, the role of the Financial Planner has become even more important. Contrary to what you may think, financial advisors aren’t just for people who already have a lot of wealth. Here in Bucks County, The First has been helping local individuals and families meet their financial goals for generations. Our professional team can help you accumulate assets for retirement and meet other objectives. We’ve put together this list of questions to ask us–or any financial advisor you’re considering working with–so you can feel empowered and informed to find the best partner for your financial planning needs.
How do you get paid? What are my all-in costs? Extra fees?
We usually don’t ask people about their income, so this question may feel awkward. However, you’re here to talk about money anyway, so move past your hesitation. When it comes to how your financial advisor earns a living, transparency is key. Here are the different ways financial advisors make money:
- Commissions: An advisor who works on commission receives a percentage (usually 3-6 percent) of the money you invest in a fund.
- Fees: A “fee-only” advisor will charge either an hourly fee for the time they spend on your investment plan, a flat fee (such as an annual rate for access to their time and services), or a retainer.
- Combination: Some advisors make money from a combination of commissions and fees.
It’s hard to say which option is better or best for you. That will depend on your particular situation and investment goals. As mentioned, transparency is the most important thing. You’ll feel better about the process when you know how your financial advisor gets paid, how much you will pay for financial advising services, and what exactly you’ll get in return. At The First, there are no hidden costs and our investment management fees are some of the lowest out there.
Will you act as a fiduciary?
Now that you know how your financial advisor gets paid, this is the second most important question to ask. According to the IRS, “a fiduciary is a person who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity.” For financial advisors, acting as a fiduciary means all of the recommendations they make and the actions they take on your behalf must be in your best interest. Choosing a financial advisor who acts as a fiduciary, as FNBN’s Trust and Wealth Management advisors do, means you can trust your financial advisor to always put your needs and goals first regardless of how they make money. This may sound like common sense, but financial institutions and advisors are not legally required to act as fiduciaries. This is why you need to ask.
Do you take custody or have access to my assets?
This is another very important question because it can help you avoid Ponzi schemes and other frauds designed to steal your money instead of investing it. A trustworthy financial advisor shouldn’t have access to your assets. Instead, they use in-house or third-party custodians to handle administrative tasks such as processing transactions, collecting dividend and interest payments.
How often do you communicate with clients?
Asking this question will help you establish expectations so there are no misunderstandings later on. The answer will vary among financial advisors, sometimes depending on how they are paid. The most important thing is to find an advisor who answers this question to your liking. Some people want to be more involved in the process, whereas others are content to let the advisor handle it and review monthly statements.
Do you have experience working with situations like mine?
If you have a heart problem, you go to a cardiologist. If you need marital counseling, you look for a therapist with training and experience in this particular niche. Likewise, financial advisors have different areas of expertise based on their training and experience. Find one with plenty of knowledge and hands-on experience in the topic–such as taxes or investing–you’re most concerned with.
When it comes to experience, local expertise can be just as crucial as topical knowledge. Here in Bucks County, many of our financial planning clients live locally but work in Philadelphia or New Jersey, where different tax ramifications apply. The same thing is true for clients who own investment property, for example, in a different state or city. When you work with a local financial advisor like the professionals at The First, you can feel confident that they’ve helped many others just like you and understand the ins and outs of local and neighboring tax laws and other regional considerations.
What services do you provide?
Remember that selecting a financial advisor should be the first step in building a beneficial lifelong relationship. Therefore, you want to find someone who can provide a range of services. Even if right now you’re only concerned with investing, for example, your needs are likely to change as time passes and your life situation changes. At The First, our Trust and Wealth Management Team provides a full array of financial planning services from Divorce Financial Analysis to Estate Administration, Investment Management, Trust Services, and more. We are your partner in financial planning throughout your life and whatever it brings.
What’s your investment philosophy?
The answer to this question doesn’t need to be flashy. In fact, a financial advisor who throws a lot of jargon at you probably isn’t the best fit. At the heart of the matter, you’re looking for someone with a long-term investment strategy who will look at your entire financial picture and develop a plan accordingly. For example, financial advisors at The First create individualized plans based on your goals and objectives. We don’t believe in “one size fits all.”
What investment benchmarks do you use?
Knowing how your advisor will measure success helps you understand what to expect from your investment plan over the long-run. Some advisors may use the Standard & Poor’s 500 as their benchmark, for example, and try to beat it. What’s important here is knowing what your advisor’s benchmarks are and what that means for your investments.
How will this affect my taxes?
Fees aren’t the only thing that can eat into your investment returns. Make sure your advisor is knowledgeable about the tax ramifications of certain investment decisions. You want to make sure that the tax bill associated with your investments doesn’t exceed the profits.
What are my next steps?
Now that you know what to talk about at your first meeting with a financial advisor, it’s time to make an appointment. May we suggest that you start with your local community bank in Bucks County? Our Trust & Wealth Management team is comprised of highly-trained and experienced professionals, so you’re sure to find a good fit. Contact us and start planning for your financial future today!