3 Questions You Must Ask a Financial Advisor

Former financial advisor Jill Schlesinger, now a CBS business analyst, tells Jack Otter of Barron’s how to protect your interests and get the best advice.

It may take a decade or more to know for sure if your financial adviser is the right one but there are few questions you can ask at the outset to improve your chances i’m jack otter editor of barron’s dot-com i’m with jill schlesinger a cbs business news analyst so jill we’re here at the barron’s women’s top women’s financial advisor conference i’m going to ask them

A lot of questions but you are a former advisor so you can give us the skinny before hiring an advisor what questions do you need to ask i think the very first and easiest question to ask is are you obligated to put my needs first this is the so called fiduciary duty and a large portion of financial professionals are not held to the standard i think that might

Surprise people in other words there’s a whole group of people who have to give you advice that’s deemed suitable for you but that’s not to be the best advice for you only somebody who is bound by the fiduciary duty is placing your needs first i think that’s a great first question to start with a doctor is held to an equivalent medical standard a lawyers held to

An equipment legal standard but not all financial advisors are no not i think all cfps are held to that people who are advisors naphtha national association or personal financial advisors are and many many advisors who work at large firms are held to that standard because of other things that are follow their name other initials just ask the question to be sure

It doesn’t mean that someone who doesn’t have that standard is not a good money manager but if you really want comprehensive financial advice i think it behooves you to have somebody who is by their duty obligated to put you first and that’s kind of related the second question you want to ask is how are you paid yeah i think this is so important i don’t know why

We get so freaked out about it i mean i i don’t i hate to sound silly but like you know you’re going to order a steak and not know how much it costs well you might but the reality is that you want to understand is this a commission base is it a fee base and acid under management fee is it a flat fee for a certain amount of money for a project ask that question now

If you get a little bit of pushback you can ask a much clearer question how much money will come out of my pocket or my envy every year that will mean the fee for you mr. or mrs. advisor also the fee to own the assets that you will be purchasing for me when you have that information you’ve got a much clearer picture of what you need to make to make up for those

Fees a lot of people don’t understand that when they buy a neutral fund from some advisors if they give them $10,000 a load is charged and so they’re actually only investing $9,500 and sometimes it comes out upfront sometimes it dribbles out a little bit along the way but in reality if you are understand what that fee is you can make a decision i prefer to have an

Asset under management feed maybe that’s important to me maybe i’m just holding a whole bunch of assets that i inherited from my great and ida i’m not going to trade it and i’m willing to pay a commission if i were to make a trade but in essence without that information how much are my paying how can you determine whether someone’s doing the right job for you and

That leads to the third question what exactly is the job they’ll be doing for you absolutely i mean look you have to understand what is the scope of the services that are provided there are plenty of comprehensive financial advisors who will do everything they’ll do a full-time financial plan and will incorporate your kids college planning your retirement planning

Life insurance state needs there are other advisors who say all i do is i manage bond portfolios you want to understand the services that are going to be provided the nature of the communication will i meet with you quarterly will i talk to you on the phone should we skype just understand what are the terms of the engagement that way you understand whether your

Needs are going to be met or not by this professional very helpful thanks you thank you

Transcribed from video
3 Questions You Must Ask a Financial Advisor By Wall Street Journal