If you have a financial advisor that you meet with on a regular basis, you should always attend the meetings prepared. Preparing to discuss your finances involves formulating a list of talking points and questions. Let's take a look at some of the best questions to ask during your consultation with your financial advisor.
Ask How Long You'll Have to Work
One of the most important questions you can ask your financial advisor is how long you'll have to work to reach your retirement goal. If you have a goal of say, one million saved for retirement, your financial advisor should be able to determine how long you'll have to work to earn that much money. Your advisor should be able to tell you exactly when you will be able to retire considering your current salary and investments, the rate of inflation, and any potential raises that you might receive through the course of your career.
Obtain a Specific Forecast for Your Financial Future
You should also ask your financial advisor how much money you need to save per week, month, or year in order to retire by a certain age. He or she will take your income, current savings, investments, and the rate of inflation into account to determine exactly how much you should be saving on a regular basis in order to meet your retirement goals.
Unnecessary Costs
Ask how much asset management is costing you. If you, or your financial advisor, are making investment transactions at a high frequency, you might have significant asset management costs. There are numerous fees to account for when trades are made, including commissions and short and long term capital gains taxes. Determine if you can find an area to cut costs, if your advisor thinks that you are trading at the proper frequency, and if he or she thinks that you have compromised your long term outlook.
Ask for a Status Update on Your Investments
Always ask questions about how the latest market activity has impacted your investments and how this affects your personal financial plan in both the short and long term. While you might not keep close track of your investments on a daily, weekly, or monthly basis, your financial advisor has a finger on the pulse of the market throughout the year. He or she should know a significant amount about the industries that you've invested in and how they are performing.
Re-evaluate Your Long Term Financial Plan
Ask your financial advisor about the probability of success for your financial plan. While most financial plans are drawn up with a goal-oriented analysis, these don't take current inflows and outflows of cash into account. Make sure that your financial advisor is willing to discuss a true financial plan that is rooted in reality. You need to know if your current plan is on pace with the expectations that were established when it was first developed.
