Questions To Ask A Financial Advisor
Key take-aways from Questions To Ask A Financial Advisor:
- Not all financial advisors are required to always act in your best interests. Over 40% of Americans mistakenly believe all financial advisors are legally required to do so.
Only fiduciaries are required to do so. - Fee-based advisors can earn both fees and commissions, often creating potential conflicts of interest.
Fee-only advisors, like Mullooly Asset Management, do not earn commissions. - Here are some questions to ask a financial advisor regarding incentives and responsibilities.
Are you always acting as a fiduciary? Will you put that in writing?
Are you paid more to direct my investments to certain products?
Will you put your fees in writing?
Do you focus only on investments, or can you also help with taxes, estate planning, retirement, budgeting, and insurance?
Do you earn any fees for referring me to specialists like estate attorneys? - We feel advisers should be transparent about their fees and compensation.
Questions To Ask A Financial Advisor – Links
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Subscribe to the Mullooly Asset YouTube Channel
Watch this episode (“Questions To Ask A Financial Advisor”) on our YouTube Channel
Link to SEC recent study
Link to Jason Zweig article
Questions To Ask A Financial Advisor – Transcript
Hey, I’ve got a good one for you. According to a recent study from the SEC, more than 40% of all Americans mistakenly believe that all advisors, including brokers, are required by law to act in their client’s best interest. That’s a huge percentage of the people that just don’t understand the kind of business that we’re in.
Fee-based advisors have licenses to sell both commission products and insurance products. But they can also act as an investment advisor. So we’re talking about fee-based advisors.
Mullooly Asset Management is a fee only investment advisor.
So when you’re working with someone who’s fee-based, it means they’re probably affiliated with a registered investment advisory firm. But they’re also probably affiliated with a broker-dealer, a big brokerage firm. This can bring a conflict into the equation.
It doesn’t mean they’re not acting in your best interest, it just raises a question.
And when we talk about these questions, a few years back, Jason Zweig (who writes for the Wall Street Journal and for Barron’s), put together a list of questions to ask a financial advisor. And we’re going to cover a few of them here.
One that I think is really a great question to start off with is, “are you always acting as a fiduciary?”
And “will you put that in writing?”
We put it right on the homepage of our website!
I’m surprised more people in our business won’t do that.
Another question to ask a financial advisor, is, “does anyone else ever pay you, to advise me?”
Now, that sounds to me, like a goofy question. But what they’re really driving at when you ask a question like this is, “do you earn more commissions – or a higher fee, if you steer me towards a certain product or a certain type of investment?”
I think that’s a great question because there are tons of conflicts I’ve seen over my career.
Another question you ought to consider to ask a financial advisor, or you should ask is, “will you put your fees in writing?”
We post them right on our website.
I’m surprised that we’re still one of the only firms I can find, that will post their fee schedule right on their website.
I think we should be completely transparent in this business that we’re in.
Another question to ask, “do you focus solely on investment management? Or can you advise me on things like taxes, estate planning, retirement – planning for retirement, budgeting, debt management, insurance?”
Yes. In addition to managing your investments.
Another question to ask, while we’re talking about this very same topic is, “do you earn any additional fees, or compensation, for referring us to specialists, like an insurance agent or an estate attorney?”
The answer from us – and the answer from everybody – should be no.
There are no secret deals or referral agreements or anything like that.
These are great questions to ask a financial advisor. We’re happy when people bring these questions up, because it means they are well informed and they want to continue to learn. So, great questions to ask.
