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Essential Tips for What to Ask a Financial Advisor

12/01/2021

Are you looking for help managing your money or reaching your financial goals? A financial advisor might be what you need. But how do you choose the right one for such an important—and personal—task? Here are questions to ask potential financial advisors.

Are You a Fiduciary Financial Advisor?

It might not feel like the first question you want to ask a prospective financial advisor, but it should be one of your non-negotiables.

Under what’s called the “suitability standard,” non-fiduciary advisors are allowed to make recommendations that they reasonably believe fit with your goals—and don’t generate excessive fees. So, a non-fiduciary advisor might push you to invest in a fund that also offers them a great commission. They are not required to put your interest over their own.

Fiduciary vs. Non-Fiduciary

Fiduciary advisors are obligated to act in your best interest. Non-fiduciary advisors operate under a suitability standard, but don’t have the same obligation. All financial consultants with our Private Client Group advisory services are fiduciaries.

But a fiduciary financial advisor must operate on a higher level. These advisors are legally bound to act only in your best interest when it comes to your finances.1 So you can have more confidence that a fiduciary advisor is truly working with you.

How Are You Paid?

Many advisors charge an annual fee that’s a percentage of how much money they manage for you. That’s called an assets-under-management fee.

1%
Experts typically recommend that you look for an advisor who charges an advisor fee of about 1% annually. That is, your advisor earns 1% of your assets that they manage for you.

If your potential financial advisor doesn’t charge an assets-under-management fee, ask them to describe their fee structure:

  • Fee only: That means the advisor collects a fixed fee only—usually an annual charge or an hourly rate

  • Commission only: In this case, they collect a fee based solely on the investments they sell you

  • Fee-based: The advisor collects both a fixed fee and commissions for investments sold

Private Client Group

Our Private Client Group advisory service offers a unique fee structure. Clients pay one flat fee for both advice and investment management fees of the underlying funds. At 0.90%, it’s lower than what many pay for investments alone.

Find out more: Private Client Group

Before you choose your advisor, tally a rough estimate of the costs under that professional’s fee structure. Consider how often you’ll be in touch, the frequency of your trades and the types of investments you plan to own.

What Additional Fees Will I See?

Your advisor’s rates aren’t the only expenses you’ll pay. You’ll likely be charged for trades your advisor makes on your behalf. And you’ll need to factor in expense ratios for any funds in your portfolio.

Check in with your advisor to get a sense of what these costs might be for you. If your advisor buys and sells frequently, your expenses might be higher than if they hold assets for longer periods. And actively managed investments, including mutual funds and exchange-traded-funds (ETFs), will generally come with higher maintenance costs than index investments.

Expense ratios are determined by dividing the costs to operate a fund by the total value of the investment’s assets.

What Services Do You Offer?

Certainly, you’ll want to ensure that the advisor you choose has the skills to help you achieve the goals you’ve already identified. But they might offer additional services to make managing your money even easier.

For instance, ask whether your advisor offers a selection of pre-designed portfolios or sits with you to create a custom one—or both. Your professional might provide automatic rebalancing or dividend reinvestment. And maybe they can handle the day-to-day investment decisions for you if you’re looking to authorize that.

How Do You Stay in Touch with Your Clients?

You’ll want your advisor to have a level of contact that fits with your personal financial needs.

That might mean monthly or quarterly personal meetings. Maybe you want regular check-ins or simply email updates. Ask your advisor how they communicate and see if they’re able to work with the style you prefer.

Additionally, find out how they respond to one-off questions or concerns. Do you need to set up an appointment? Can you reach them with a short call or email? How quickly can you expect a response?

Whatever schedule you set with your advisor, it may also help if you prep before a session. That way, you can help make sure you cover what’s important to you.

Questions to Ask Yourself

Before deciding to hire a particular financial advisor, give yourself a gut check by considering these questions:

  1. Do I feel that this person gets me?

    You want your advisor to understand your needs, goals, dreams and fears.

  2. Do I feel comfortable with them?

    Your advisor works for you, so you shouldn’t feel nervous or uneasy about stating your needs, declining recommendations and sharing personal information.

  3. Do they respect my comfort level with risk?

    Steer clear of advisors who use pressure tactics or hard sell you on specific investments. It’s your money, after all.

  4. Can I understand them easily?

     Find an advisor who communicates clearly and in plain language—not confusing jargon.

  5. What do I want to get out of this relationship?
    Why did you decide in the first place? Recall those reasons and make sure your chosen professional checks all the boxes.

A great financial advisor may be an invaluable resource. And the right professional can help you clarify your goals, get on track and sidestep obstacles along the way. When you can ask the important questions upfront, you’ll feel more comfortable choosing a financial advisor and working together toward your big goals.

Looking for Financial Planning and Advice?

Our Private Client Group advisory services offers both for the journey ahead.

What is a Fiduciary Financial Advisor, by Coryanne Hicks, U.S. News & World Report, April 15, 2021.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Annual Investment Advisory Fee is 0.90% for balances $5 million and under and 0.70% for balances over $5 million. American Century Investments Private Client Group charges a single annual fee based on the value of your assets under management with us. The single fee includes our Private Client Solutions, along with any underlying trading costs, commissions, and custody services related to our recommendations. American Century Investments' financial consultants do not receive a portion, or a range of the advisory fee paid by clients. Client-oriented trades outside of our recommendations and other activities like wire transfer fees, may result in additional cost.

Private Client Group advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. This service is generally for clients with a minimum $50,000 investment. Call us to determine the level of service that is appropriate for you. The advisory service provides discretionary investment management for a fee. All investing involves risk.