Investors need to prepare questions to ask a financial planner to find the right investment professional who can help manage their investments according to their objectives and goals.
Nest Egg provides a guide on what to ask investment professionals in an interview in order to determine if they’re the right person to hire.
Evaluate your purpose for investing
Before consulting a professional, consider evaluating your investment objective because this will help narrow down the list of potential advisers.
Answer this: What is this investment for?
Before searching for an adviser or broker, clarify your purpose for the investment and identify your time horizon and risk tolerance.
Knowing the underlying reason for the intended investment may help determine the kind of advice needed and direct you to investment professionals who could potentially help meet those objectives.
Likewise, be clear about your requirements and expectations from a financial manager so that the potential advisers you will interview will have a clear idea about the kind of service they are required to provide.
Important questions to ask investment professionals
The first meeting with a stock broker, financial planner or adviser should ideally be an informative exchange.
Don’t be afraid or embarrassed to ask the investment professional to explain whatever areas you have difficulty understanding. Refrain from signing any document or employing the professional without receiving satisfactory and understandable responses to all your questions.
Consider inquiring about the following:
- Credentials and Australian financial services (AFS) licence
Credentials and AFS licence
Ask the investment professional about their credentials and if they have an AFS licence.
Although a degree in accounting, finance, economics or financial planning are preferable, the professional doesn’t have to own a diploma on these disciplines. Rather, they should be able to show that they took steps to learn the ropes and have the qualifications to give financial and investment advice.
Any individual who gives investment recommendations, whether they are compensated or not, must have an AFS licence. This licence will allow you to confirm the legitimacy of their operation.
Ask about the financial adviser’s previous experiences and clientele. This should give you an idea if the adviser has experience dealing with people who share similar circumstances. Likewise, it may help you discern if the adviser can truly understand your objectives and can provide appropriate advice.
It’s best to know what type of products the adviser can offer so you will know their investment limitations. Likewise, the adviser should be able to explain how a recommended product works and its role in the strategy for your portfolio.
This is important because some advisers may recommend switching to a different product that they receive commissions from, which could be a conflict of interest at the expense of the investor.
Ask about the extent of services that the adviser provides and whether they have the appropriate licence to extend those services.
The adviser should also be upfront about the limitations of their advisory function so that you will not expect a personalised recommendation if they are only licensed to give general advice.
Recurring fees can negatively impact or neutralise the growth of an investment portfolio, which is why it’s important for you to be frank and ask about the adviser’s fees in percentage and dollar amount.
Consult the financial advisers register
Once you know the name and AFS licence number of the adviser, the Australian Securities and Investments Commission (ASIC) recommends consulting the financial advisers register to learn their details, such as their credentials, experiences, professional associations and approved product list, among other qualifications.
This information has been sourced from ASIC and FINRA.