How to Choose the Right Financial Advisor for You: Five Vital Questions You Need to Ask

There's a reason professional athletes have professional coaches, ultra-successful entrepreneurs have mentors and great businesses have strong boards of advisors.

The coaching, guidance, insight and accountability provided by these experts help people reach their greatest potential. If you could do the same and get this kind of expert in your life to reach your highest potential, why wouldn't you?

This is exactly what a financial advisor can do for your wealth. If you want to optimize your investments and maximize your net worth, it might be time to partner with a professional who can help you do just that. But how do you know who to hire?

Here are five questions you need to ask before working with any financial advisor, to ensure the relationship will help you maximize your wealth.

1. What experience and qualifications does this advisor have?

The tricky thing about selecting a financial advisor is that their job title might not actually tell you anything about what they're qualified to do. Terms like "advisor" and "planner" aren't regulated or attached to specific designations—and so literally anyone can use these job titles regardless of their experience or abilities.

That's why it's important to do your due diligence and ask these questions to get specific answers. Some common designations that speak to an advisor's experience, knowledge, and training include the CFA (Chartered Financial Analyst), Certified Investment Management Analyst (CIMA), and Certified Financial Planner (CFP).

The first two indicate expertise in investments, and the CFP shows that advisor has a good grasp of comprehensive financial planning that takes all areas of your life into account. All are regulated by governing bodies.

Depending on your needs and where you are in life, designations specific to retirement planning and knowledge might be important to you as well, so you might want to look for a Retirement Management Analyst (RMA)a Retirement Income Certified Professional (RICP) or a Certified Retirement Counselor (CRC).

2. What services does the advisor provide?

Once you have an understanding of how experienced and qualified your potential advisor is, get clear on what exactly they can do for you. Do they specialize in financial plans, or are they equipped to help you mange everything from stocks and bonds and mutual funds to annuities and IRAs? Do they offer sophisticated investment strategies and recommendations, or do they stick to the basics (or have a different area of specialty)?

Couple meeting with an Advisor

3. How does the financial advisor help people in your situation?

Ask about not just what an advisor does, but who they do it for. It's great if an advisor tells you they can help with your financial planning as well as your investment management if that's what you're looking for—but if they typically only provide these services for someone in their 70s, and you're in your 40s, they might not be the best fit for you.

This is true the other way around, too! Advisors who specialize in helping clients in asset accumulation phases of life might not be well suited to help you navigate retirement withdrawal strategies.

You likely want to find an advisor who has experience in the industry and experience working with people in a similar life stage and financial situation as you. They should be able to relate to your goals, needs and challenges—and, just as importantly, make you feel heard and understood (not judged).

4. What's the advisor's investment philosophy?

There are various ways to approach wealth management, and you need to make sure you resonate with the philosophy your advisor brings to the table. Ask if they can explain that philosophy, and how they came to form it. Do they pursue value investing? Growth investing? Socially responsible investing? Why do they believe what they do—and, more importantly, do you also believe in what they're doing? You want to make sure your values align, especially through turbulent times in the market.

5. How does the advisor get paid?

There are many different business and compensation models in the financial services industry, and some come with hidden fees you might not see unless you specifically ask.

In general, advisors are compensated in one of three ways:

  • On commission: These advisors sell products and investments and make a percentage on the sale. They often provide service or advice at no additional charge, but that doesn't mean you don't pay them; the fees that go to the advisor are often built into the products sold.
  • Fee-only: Advisors who are fee-only only receive compensation directly from their clients. They don't sell products and cannot accept commissions or kickbacks from third parties.
  • Combination: These advisors may charge you a fee for service or advice—but they might also sell products on which they can earn commissions, as well. They may receive compensation from third-parties for selling certain funds or strategies.

All fee models can work for clients; what's important is that your advisor is transparent with you and explains the one they use, how it works, and what you can expect to pay.

By asking these questions, you can get clear on how an advisor can help you—and more importantly, the value they can add to your life and your wealth.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by Bankoh Investment Services or its affiliates to buy or sell any securities, investments, or insurance products. Where specific advice is necessary or appropriate, consultation with a qualified tax advisor, CPA, financial planner, or investment manager is recommended. Asset allocation and diversification do not assure a profit or protect against loss.Investment and insurance products are offered and sold by Bankoh Investment Services, Inc., a nonbank subsidiary of Bank of Hawaii and a member of FINRA/SIPC. Investment and Insurance products are NOT FDIC INSURED, NOT BANK GUARANTEED, NOT A DEPOSIT, AND MAY LOSE VALUE, INCLUDING LOSS OF PRINCIPAL.


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