Questions to Ask Your Advisor
Selecting the right financial advisor is a tough task; tougher is the job of evaluating his worth. This is where most of us tend to get nervous and eventually, confused. But fact remains that they received their education and earned their degrees only to help people out with their finances. You are not nervous while cross-verifying information regarding a product prior to buying, so why with the financial advisors? It’s required all the more because you shall be handing over your hard-earned money to him; therefore, you must make sure that no blunder results as an aftermath.
The best way to do this is evaluating thoroughly a financial advisor’s backgrounds. Disciplinary history – as it is called – can be checked from the CRD (Central Registration Depository), available from the State Securities Regulator or FINRA. Once you are satisfied with that, it’s time to put forth your other queries. It should start by enquiring the amount that’s been paid as commissions and/or fees.
About financial products and schemes
- Is the chosen financial product/scheme registered with SEC/ State Securities Agency?
- What would the total amount come up to regarding purchasing and maintaining the product/scheme?
- How can the fees be reduced or avoided?
- If no fees can be reduced, till what extent the product/scheme’s valuation needs to increase before breaking even?
- What would be the returns on selling the product/scheme and how easy would it be to sell?
- What would be the liquidity of the product/scheme as well as the risks?
Investments and pensions
In addition to the questions mentioned above, one can ask the following to his/her financial advisor:
- Till what extent the investment shall match my investment goal? i.e. suitability of the investment.
- How the investment shall generate revenue? Is it through dividends or interest or capital gains?
- Shall the investment increase in value over time?
Life and general insurance questions
For life/general insurance, a financial advisor needs to be dealt with differently. After all, you have the entire right to know the outcome of the investment over a span of time; therefore:
- Enquire about the reputation of the insurance company and its present market status.
- Enquire about the benefit amount, the period of coverage and the maximum amount the policy is supposed to pay every day.
- Whether the elimination period (the time before insurance jumps into the scene) is a short or a long one. For a shorter elimination period, the premium is higher and vice-versa.
- The coverage! Unless a policy covers things, it can’t be called insurance. The more it covers, the better it is, with a minimum claims time and other benefits. However, limitations often cloud the benefits; it’s essential to know about them as well.
Mortgage questions
The first thing a financial advisor requires to deal in mortgage is a regulation from the FSA or the Financial Services Authority. This needs to be verified first and then, the way the financial advisor is going to get paid. If it’s you who shall pay him, the fee shall be typically around 2.5% of the mortgage amount; otherwise, the commission is paid by the lender whose mortgage the financial advisor shall be selling.
The next question should be on associated services like life cover and home insurance; it can be put in the way – Can you offer me something that another lender won’t? But to shift to this question, start with asking the reasons behind why you are offered the mortgage scheme.
