With the rising inflation and uncertainties that life can throw sometimes, it has become increasingly important for everyone to maintain a good financial health. And in order to attain a good financial health, effective planning is much needed. This is where the role of a financial advisor kicks in. An advisor, who understands financial aspects of several investment avenues, is better equipped to help an individual with a financial plan. However, you should not blindly rely on your financial advisor. Apart from asking the basic questions like fees, credentials or licenses; you must ask a few more questions to your advisor to ascertain how good she/he is.
Here are five questions that you should ask your advisor before you take up investments through him:
Is My Interest Above Yours?
Servicing you with financial advices is your investor’s job and it is certain that he will look at his own commercial interest. While it is part of the arrangement, you need to understand if your interest is in alignment with his when he is suggesting you a financial product. For example, at times your portfolio might require re-shuffling or liquidation of assets which your advisor might not address if it does not benefit him.
Are My Financial Goals Realistic?
After you brief your advisor about your needs and financial goals, do check if they are reasonable and can be executed well. Your advisor’s honest answer may or may not coincide with your thought process. But you not need worry. Consider your advisor’s views to be a second opinion. It only adds up to ascertain your decision.
Which Investment Or Insurance Options Suit Me The Best And How?
Based on your goals, your advisor would recommend you financial products. You need not approve of all that is suggested. Understand the rationale behind his suggestions and how it will help you in achieving your financial goals effectively. You should pose questions on how investments undertaken or Insurance products suggested can help you in the long run. This will not just help you develop clarity on financial products but also ensure that your advisor will give you the best possible advice.
How Often Will You Be Reviewing My Portfolios?
Reviewing of portfolios is an important aspect of financial planning. There is a possibility that you may not get time to keep track on the status of your financial plan. And advice given in the past may not, at times, be relevant with changing times, and any change in your income. So, it is important that your portfolio should be reviewed regularly. As an investor, you should ask how frequently your portfolio would be checked by your advisor. Ideally, every three years, portfolios must be reviewed thoroughly. And changes or new recommendations, if any, need to be implemented accordingly.
Have You Fairly Understood My Current Financial Condition?
Your financial advisor is like a doctor who takes care of your financial health. So, you need to share all financial details with him and that includes talking about all your assets and liabilities. This tremendously helps an advisor to come up with a suitable financial plan. However, after providing all your details; you should not hesitate in asking whether your advisor has entirely understood your current financial situation or not.
There should not be room for any kind of misunderstanding or miscommunication between the two of you, which could, unknowingly, harm your financial planning.
The writer is CEO, BankBazaar.com.