You Must Ask Your Financial Advisor these 4 Critical Questions

24-June-2021 |

Financial advisors can help you with financial planning, investments, savings plan, saving insurances, or any savings solution.They provide proper advice and devise strategies to eliminate financial risks and keep your financial or retirement goals on track.

If you are not sure about your investments or insurance, you can always approach a financial advisor. But make sure that you reach out to a professional advisor. Not all financial advisors are equally experienced and talented. To protect your investments and retirement funds, you should seek the advice of a professional. To assess if your advisor is a financial expert and a thorough professional, you must ask him/her the following critical questions.


1. How Do You Invest?


Most people don’t pose this question to their financial advisors. But before taking any investment advice, it is always better to ask this question. Based on how he/she answers this question, you will get an idea about his/her capability and experience. You can also ask questions related to investment strategies and the returns achieved on his/her portfolios and mainly about risk management. Do not hesitate to ask critical questions like these. If you take advice from an inexperienced financial advisor, you may lose your hard-earned money due to the wrong investments.


The answer to this question can help you understand if your advisor is trustworthy. Collaborate only with licensed financial advisors. If you have already partnered with a financial advisor who is not trustworthy, try to find another. Can you go to a doctor who receives a fee for administering a certain form of medication instead of the one you need? No way, right? It is the same with financial advisors too.


2. How Much Do You Charge?


It is better to know about the fees of the financial advisor upfront. Along with the charge, ask the person how he/she makes money. The answer to this question should end within 25-40 secs. If it exceeds this time, think twice before considering the advisor. There are two ways through which advisors make money, the first is the fee, and the second is fee and commission. If the advisor earns both fees and commissions, he/she works to earn commissions by selling you various investment products. This may be bad for your investments. Make sure that you select an advisor who does not earn commissions through your investments and works in your best interests.


Most advisors charge around 1% of the managed investments annually. If your advisor is charging you less, that might be a red flag. I will tell you why. Each transaction you make has a different price tag. Certain advisors may be rewarded by selling more expensive shares. You may also be charged secret commissions for everything, from a broker's operating costs to account service fees. These charges are important. The extra payments of even a tenth of a percentage point will add up to hundreds of rupees throughout a lifetime.


3. What Are Your Qualifications?


Find out about the certifications your advisor has. Many organizations will merely ask their advisors to attend a few courses or pay a fee if they want to work for them. You should stay away from these advisors. Instead, look for one with any of the following qualifications:

  • Certified Financial Planner (CFP)

  • Certified Financial Analyst (CFA)

  • Certified Public Accountant (CPA)

It is also a good idea to hire a financial advisor who has at least a decade of expertise or work experience as a financial advisor. You also want your advisor to have a spotless background, which means they haven't had any run-ins with the law or authorities. It's also a good idea to inquire whether they've ever been sued. Before entrusting your hard-earned money to an advisor, make sure there are no red flags.


You would wish to inquire about the advisor's specialization and the number of customers he or she takes on each year. This will give you an idea about the market sector the advisor specializes in, if any, as well as the range of investment advice he or she provides. Some investors choose someone who specializes in a specific market segment, while others want a broader variety of guidance.


          4. How Can You Help Me with Taxes*?


A decent financial planner should be able to do more than just make investment recommendations. One essential service they should have is tax-advantaged portfolio optimization. Ask the accountant how he or she can determine which portfolios to assign to your taxable account versus a non-taxable account, such as an employee retirement account.


Not only taxes but also savings insurance can save your taxes. So, ask your advisor how he or she will plan your insurance in the current financial situation to save taxes. Also, ask the advisor about mutual funds. Some funds' high internal turnover can lead to capital gain taxes. With proper tax planning, if the financial advisor saves at least 1%, that small percentage can offer huge returns over a long period.


In addition to the questions listed above, remember to ask, “How do you assess your client’s risk profile?” This is important because, without proper risk profile assessment, financial advisors may offer the wrong advice. The risk profiles of people vary with their age. So, do not forget to ask your client about this and note his/her response.



Don’t just select a random financial advisor for your retirement planning and investments. Don’t hesitate to ask the questions discussed above. If possible, try to ask more critical questions. Enquire whether he or she knows about excellent products available in the market, such as Tata AIA Life Insurance Fortune Guarantee Plus(UIN: 110N158V02).

Approach qualified professionals. Don’t waste your hard-earned money by choosing the wrong one.



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