Get the Most From Your Financial Advisor
June 17, 2014 By Emily Boothroyd, JD, CFP®, CDFA™ DailyWorth Expert
Certified financial planner, certified divorce financial analyst and estate planning specialist
“You probably think I’m stupid,” one of my clients said to me.
I paused before I answered. She was in the middle of a divorce and had learned that she was on the hook for more debt than she realized. This client was also unclear on her investments and had signed documents for planning concepts she didn’t understand.
Frustrated and scared, she had reached out to me for advice because she didn’t feel comfortable with her previous advisor.
I didn’t think she was stupid at all. In fact, this is a phenomenon I’m seeing far too much in my practice: intelligent, capable women who, for various reasons, don’t take a seat at the table when it comes to their finances.
Whether you’re facing analysis paralysis and don’t know what to do with your money, have delegated the “finance” role to a partner, or have just let things coast in your portfolio without really checking in, read on for ways to get more out of your advisor relationship.
1. Show up. Literally.
I always request that both spouses participate in planning meetings. I can’t tell you how many times I’ve had women decline to participate. I can, however, tell you how many times men have declined to participate: zero.
That’s right. I’ve never had a husband or male partner tell us to go on without him; we’ve simply scheduled for a time that works for him as well. Whether it’s finding a sitter, asking for a video conference, or requesting an off-hours appointment, make it a point to be present.
2. Stop the meeting.
If the discussion gets too deep into an area that’s not familiar to you, put it on pause and ask for an explanation. A professor of mine in law school once bellowed, “What are the three hardest words to say in the English language?” Seventy of us sat mumbling under our breath and counting words on our fingers...
I am sorry? I love you? Finally he yelled, “I don’t know! It’s ‘I don’t know’!” We all laughed, but it drove home an important truth: most of us are uncomfortable admitting that we don’t know something.
It’s incredibly powerful and liberating to ask for help and to learn something new. I love educating my clients and helping them to understand new financial concepts. If something confuses you, or interests you, don’t be shy — ask away.
3. Get to know your risk appetite.
Often clients get excited about investment returns and forget to think about risk. I recently had a very conservative client tell me she wanted to go heavier into stocks because a friend recently did.
When I reminded her about market volatility, and we discussed the risks involved in changing her portfolio, she remembered how upset she was when she saw her equity portfolio decline in a previous market downturn. Returns are just one component to a successful planning strategy; risk is an important element to understand.
4. Challenge us.
If there was one clear path to success, we’d all be on it. The reality is that there are varying opinions about the economy, the market environment, and how to achieve financial success. I’ve watched too many women nod and take what their portfolio managers say as gospel without asking for more information.
By contrast, I’ve seen men ask a barrage of questions and have highly productive conversations. Don’t be afraid to ask why a decision was made, or why your advisor has a certain view on the market — it will only deepen your knowledge and strengthen your confidence in your team.
5. Figure out the fees upfront.
I’m shocked by how many people hesitate to broach this question. It’s important to know how your team gets paid. Do they make more money if they put you into equities or a certain strategy?
How are they incentivized? Learn how much you’re paying, how your advisor is compensated, and what safeguards are in place to ensure your best interests are being served.
While discussing fees during the interview process with our firm, a new client told me that she didn’t pay any commissions with her previous advisor. After looking at her statements, I suggested she double check. She called me back after discovering that she had been paying commissions for years without knowing it.
Ask what you’ll be paying when you invest.
6. Build a good team.
This is your life story — take the starring role and build an awesome supporting cast around you. This should include an accountant, an estate planning attorney, a financial planner and a good investment team.
Each member of the cast should return your phone calls, engage in proactive planning, talk with each other, and make you feel like you’re the most important person in the room.