Hiring a financial advisor is a big step, but your work does not end there. Setting the right tone is essential from day one. It is important to stay involved and take certain steps from the start to get the most out of your association. This way, you can be well on your way to making the most of their expertise and securing your financial future without any unwanted hiccups.
This article will walk you through five steps to take right after hiring a financial planner to ensure that your relationship with your financial advisor is productive and beneficial.
Below is a financial planning checklist for working with your financial advisor right after you hire them:
1. Discuss the financial planning advice fees
Although you may have had a general discussion about fees before hiring a financial advisor, you need to dig into the details. Getting clarity on how, when, and for what services you will be charged ensures transparency and avoids disagreements later. Before hiring your financial advisor, you might have inquired about their general fee structure, such as whether they charge based on Assets Under Management (AUM), an hourly rate, commissions, or a flat fee. Now that you have decided to work with them, it is important to get specific. One of the first things you need to understand is the payment frequency. Will you be billed monthly, per meeting, or perhaps even on an hourly basis? These details can significantly affect how much you end up paying, so you must know them upfront.
For instance, if your financial advisor charges an hourly fee, it is important to clarify how they calculate these hours. You should determine whether you are paying solely for time spent in meetings or if you are also being billed for time they spend on research and follow-ups for you. If your financial advisor uses an AUM-based model, where their fee is tied to a percentage of your investments, you will need to confirm if the fee increases as your portfolio grows. You should also ask whether your financial advisor offers package deals. For example, do they charge a flat fee for a bundle of services, such as retirement planning, tax strategy, and investment management? If so, make sure to clarify what services are included in the arrangement and whether any additional services might come at an extra cost. It is also important to know if your financial advisor offers flexibility in their services. Some financial advisors may stick rigidly to the agreed-upon services, while others might be willing to adapt based on your changing needs. Knowing where your financial advisor stands on this will help you decide whether the arrangement is a good fit for your financial goals.
In addition to understanding the services included, you should also clarify the extra charges. For instance, there could be an additional fee for unexpected services if there is a sudden change in your financial situation. Make sure to clarify whether these additional services will be charged separately or are included in your original agreement to avoid any surprises down the line. Another key point to address is how flexible your financial advisor is when it comes to altering the fee structure over time. For example, if your financial needs evolve and you require more or less comprehensive services, is your financial advisor open to adjusting the fee arrangement? Some financial advisors may allow you to switch between payment structures, such as moving from an hourly rate to an AUM model. You must discuss this to ensure that your agreement can evolve as your circumstances and needs change.
2. Discuss your financial goals openly
Discussing your financial goals openly with your financial advisor is essential to build a successful professional relationship. Having an open and clear conversation ensures that both you and your financial advisor are on the same page from the very start. It also gives them a clear picture of what you hope to achieve from their association. People typically hire a financial advisor for a specific reason. This could include saving for a house, planning for retirement, or tackling a financial problem, such as debt or overspending. However, your goals likely extend beyond that. For example, while your immediate focus might be purchasing a home without accumulating too much debt, you may also have secondary goals like buying a car, increasing your savings rate, or boosting the returns from your investment portfolio.
When you sit down with your financial advisor, it is important to share not just your primary goals but also the smaller ones that may influence your financial journey. A comprehensive discussion will help your financial advisor craft a plan that aligns with your present income, lifestyle, and long-term goals. For instance, purchasing a home might be your top priority for now, but other goals, such as saving for your children’s education, could also be part of the picture eventually down the line. A financial advisor can help you pursue each of these goals without compromising on any one of them. A well-rounded financial plan takes into account not just your immediate needs but also how they interact with each other. For example, if buying a house is your primary focus, your financial advisor may suggest ways to build your savings to help you with the down payment. Additionally, they may also recommend ways to improve your credit score, which could help you get a loan at a favorable rate and also benefit you when it comes to other goals like purchasing a car.
Explaining your timeline is equally important. You must discuss if you want to achieve your goals within the next few years or over the long term. Let’s say you want to buy a home in the next two years but are also considering purchasing a car during the same period. Without comprehensive financial planning, these two goals could create a conflict. Talking openly about your preferred time frame can help your financial advisor assess the feasibility of your plans and recommend strategies as needed.
Ultimately, the more open and detailed your discussions, the better equipped your financial advisor will be to work for you. As long as your financial advisor has a clear understanding of what you want to achieve, they will be able to create a dynamic plan that considers all your financial concerns and aspirations.
3. Share information and documents
Sharing information and documents with your financial advisor is a necessary part of the planning process. They will need access to your key financial details to create a suitable strategy for you and to understand your present financial situation. Here are some of the documents that you may need to provide:
Retirement plan account statements
Investment account summaries
Cash balance reports
Income tax returns
Recent pay stubs
Credit score reports
Insurance policy documents
When sharing personal information with your financial advisor, it is important to take essential steps to protect your privacy. For instance, you may worry that your financial advisor can have access to your personal details, such as your Social Security Number (SSN) and other similar things, which can seem invasive. It can also lead to financial fraud. However, most financial statements, like bank and investment accounts, do not typically include highly sensitive details like your SSN. Even if any of the documents you are asked to share do contain this information, you can hide these details by marking them out before handing them over to the advisor. In most cases, your financial advisor will not ask for your SSN very early on in your association. However, if your financial advisor requests this information upfront, do not hesitate to probe further and even deny it if necessary. It is also critical to avoid using unsecured channels, like social media platforms, to share your financial documents. These platforms may be prone to hacks and do not always protect your data. Therefore, when sharing sensitive information, you must opt for more secure methods such as encrypted email. If you are unsure about the safety of digital options, you can also consider mailing physical copies. You must also make sure to inquire about how your financial advisor stores your information. Ideally, financial advising firms have security systems and sophisticated software in place to keep your data safe. However, you must always confirm to ensure your data is protected.
4. Be clear about your risk appetite
Being clear about your risk appetite is essential when talking to your financial advisor. Your risk tolerance dictates where you allocate your money and the kinds of investments you choose. If you have a higher risk appetite, you would be comfortable with taking on more risk, which may lead you to invest in more aggressive options such as stocks, cryptocurrencies, hedge funds, and other alternative assets. On the other hand, if you are more risk-averse, you might lean towards safer options like bonds, Certificates of Deposits (CDs), or money market accounts.
While your risk appetite is often influenced by your age, it is not the only criterion that comes into play. Younger individuals typically have a higher tolerance for risk, which makes aggressive investments more suitable for you if you are young. However, other considerations, such as your income, future goals, and personal preferences, can also affect your approach. For example, even if you are older and nearing retirement, you might still opt for higher-risk investments if you have ambitious financial goals that require greater returns. Conversely, sometimes even younger individuals may prefer low-risk investments despite having the time horizon to take on more risk simply because they prefer financial stability over potential gains.
It is crucial to have an open discussion with your financial advisor about your comfort level with risk. A good financial advisor will not only consider your age and income but also take into account your personal preferences and long-term objectives. Letting your financial advisor know your preferences can help them recommend investment options that align with your unique financial situation.
5. Employ your financial advisor’s recommended strategy
The final step right after hiring a financial advisor is to put their recommended strategy into action. After you have had thorough discussions about your financial goals, risk tolerance, and fee structure, your financial advisor will give you a customized financial strategy that can help you achieve your financial objectives within your risk profile. This strategy may involve investing in specific options, setting investment or savings limits, or committing to a specific time frame for reaching your goals. In some cases, the strategy could also involve lifestyle adjustments, such as cutting back on your monthly spending or prioritizing certain financial goals. For example, if you aim to save for both your child’s higher education and your retirement, your financial advisor might suggest focusing on one goal first or scaling back on short-term expenses to meet both targets at the same time.
It is important for you to have trust in your financial advisor and implement their recommended plan. Since you have already had discussions with your financial advisor to address all your concerns or preferences, you should feel comfortable moving forward with their advice.
To conclude
Open and frequent communication is the best strategy to adopt with your financial advisor after hiring them. A good, transparent partnership ensures that both you and your financial advisor understand each other’s concerns and can work together effectively. If, over time, you feel that the relationship is not working for you, it is perfectly fine to move on and find someone better suited to your needs. However, before making that decision, give it some time and make sure you are doing your part by staying proactive and following your advisor’s advice.
Use WiserAdvisor’s free advisor match tool to get matched with seasoned financial advisors who can offer comprehensive financial planning for all your concerns and goals. Answer a few simple questions and get matched with 2 to 3 vetted financial advisors based on your requirements.
