As individuals reach age 50, they will likely emphasize their careers more than retirement. Reflecting on this next phase of your life is essential before it sneaks up on you. Most people seeking financial advice do so after a significant life change. This includes marriage or divorce, receiving an inheritance or other large sums of money, or reaching retirement age.
Most firms have experienced a 37% increase in clientele from their early to mid-fifties. Many “Gen Xers” are busy saving and earning while preparing for their kids’ college and retirement funds. Regardless of your situation, preparing to speak to a financial advisor can be beneficial irrespective of your life stage.
10 Questions to Ask a Financial Advisor as a “Gen Xer”
1. What Services Do You Offer?
Before you decide to work with a financial advisor, you must understand their specific services and expertise. It is essential to ensure that your advisor provides financial education to help you understand complicated financial decisions. However, if you’re looking for a broad range of areas, you may consider general services in retirement planning, tax advice, wealth management, and estate planning.
If the advisor you’ve selected does not have experience in a specific area important to you, do not be afraid to ask to be referred to someone more appropriate for your needs. Financial advisors provide security and peace of mind, so do not hesitate to vocalize what needs are important to you.
2. How Much Do You Charge?
Ask your potential advisor what their cost will be upfront. If your advisor does not earn a commission, you can be assured they have no financial incentive to see you invest in particular ways. If your advisor’s services are contingent on your portfolio, then your advisors may assist in growing your portfolio, meaning more fees are added to your services.
3. What is Your Fiduciary Duty to Me?
Fiduciary duty refers to the integrity of the relationship between client and advisor. The fiduciary obtains legal responsibility for the task of care to pursue and protect the client’s interests. Duty of care maintains that advisors be attentive and make morally and ethically sound decisions on behalf of their clients. Failure to uphold the duty of care could result in legal action by clients, so it is essential to ensure that your advisor is not operating with a conflict of interest.
4. What Custodian Services Should I Use?
Your advisor will help you decide whether custodian bank services apply to your financial situation. A custodian bank is an institution that holds a customer's financial accounts or assets to prevent them from being lost or stolen. The custodian may protect bonds, stocks, or other assets (in both digital and physical forms) in the customer's personal interest. Custodian banks can also manage the finances within the accounts, handle settlements, and should always comply with your taxes.
5. How Often Do I Need to Update My Financial Plan?
Generally, it is a good idea to check your portfolio annually to ensure that your financial goals are consistently met. What may have been suitable 6-12 months ago may not be ideal for present-day situations. It is recommended that you meet with your advisor one to two times per year to ensure that you stay on track with your goals and that they accommodate your needs to provide the best possible outcome..
6. Does Your Advisor or Firm Offer Virtual Advising Options?
A robo-advisor is a virtual platform offering financial planning and investment through an automated algorithm with little human oversight. These services utilize questionnaires to get to know your financial portfolio and use the collected data to select a plan of action that best suits your current situation. Robo-advisors are typically inexpensive compared to their physical counterparts, so if the cost of an advisor concerns you, this is a great option. However, many criticize robo-advisors for their lack of empathy and complexity.
7. What Are the Best Benefits For My Liquid and Illiquid Funds?
A liquid asset, or a cash equivalent, is an accessible asset turned into cash quickly. A liquid asset can include physical cash, certificates of deposit, money-market accounts and investments, and overnight reserves. In terms of their liquidity, obtaining money quickly for these assets is the ultimate goal.
On the other hand, liquid assets are reserved for extended periods and cannot be easily converted into cash. Liquid assets are often saved for retirement and can only be accessed once the investor reaches a certain age.
8. What is Your Investment Policy Statement?
An investment policy statement (IPS) (sometimes known as an investment agreement) between an advisor and a client outlines how a financial advisor will meet a client’s investment goals. These agreements should be personalized to your portfolio, as well as detail the cost of your advisor’s services, such as asset identification and allocation, liquidity requirements, and risk tolerance.
You and your advisor will also establish a review process for your financial plan to ensure that you are continuously reaching your long-term goals. Your IPS should include monitor and control procedures to maintain the status of your portfolio that correlate with your needs.
9. What Is Your Investment Philosophy?
Every financial advisor has a different approach to forming their investing strategy. An investment philosophy is a set of principles to create your financial plan. An investment philosophy is developed over time as previous experiences and current life circumstances shape what is important to you at a given moment. A thoughtful investment philosophy
It is helpful if you and your selected advisor share a compatible vision for future investments and asset allocation.
10. What Investment Benchmarks Do You Use?
An investment benchmark is a set standard that advisors and firms use to establish a measure of performance. The investment strategy and benchmark will differ depending on your financial situation and needs. Investors look at benchmarks as the standard of your portfolio's performance.
Investment Benchmarks can represent multiple securities, assets, or other tools used to describe the performance of a fund, stock, or any other investment type. When evaluating the trajectory of your portfolio, your selected benchmark will compare.
How To Find a Financial Advisor
Many people seek the guidance of a financial advisor for many different reasons. Still, with so many differing expertise, deciding the best fit for you can take time and effort. A financial advisor should offer guidance on understanding your options, solidifying your short and long-term goals, and determining the payment rate. Whether or not you're looking to save, invest, or plan, a financial advisor can help you choose the trajectory of your financial investment plan.
Navigating your financial life in your 50s can present unique challenges, such as balancing your financial needs with your family’s needs. Many Gen Xers, while preparing for retirement, often feel pulled to other financial obligations that prohibit them from reaching their long-term goals. For assistance in determining the most suitable financial options for you, Expertise.com's directory offers a directory of local financial advisors.
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