It is common for people to have financial advisors (FAs) handle their financial planning. But financial planning shouldn’t be a one-man game by your FA. You should also be a part of the process of financial planning. If you are not regularly there to share with your FA, how can you expect him/her to know what you need in life, let alone design your financial plan?
Thus, if you are serious in achieving your financial goals, you need to meet regularly with your FA. Ideally, you should meet him/her every 3 months. Each time you meet him/her, there are five questions you need to ask your FA.
1. Things have changed in my life. What should I do?
Three months is neither a short nor long time. But a lot of things can happen in three months. You might have entered a different life stage. The experience that you have had in the last three months could have altered your life outlook. These changes should be communicated to your FA, especially if it affects your financial goal.
For example, if you have just taken on a new job that has higher injury risks, you might need to adjust your life insurance coverage. If you have started planning for a new child, you might need to relook your financial plan. With your FA by your side, this is the best time to consider all the changes in your life and its financial impact. Your FA should help you identify and plug those gaps early whenever you readjust your life priorities.
2. Am I closer to my financial goals?
When you first met your FA, he/she would have started the relationship with you by understanding your financial goals. After understanding your financial goals, your FA would then recommend you some insurance and/or investment products to help you achieve those financial goals. Thus, it is important for you to keep track of your progress towards the financial goals whenever you meet your FA for a review.
There is no better time to get specific answers from your FA than during the quarterly review. If your FA tells you that things are going on track, ask him/her to show you the evidence. It can be a simple chart to illustrate how your money has been growing towards your financial goal. Make sure to get your FA’s confirmation that your investments are performing as per both your expectations. This is especially if the success of your financial goal is dependent on your investments’ rate of return.
3. Can you give me an update of what worked and what didn’t?
If your FA tells that you are drifting away from your financial goal, you need to find out what exactly went wrong. This is not for you to point fingers because no investment strategy is foolproof. The reason you need to understand what went wrong is so that you can make remedies and steer your financial game plan back on track. Ultimately, your financial goal is your responsibility. Thus, you need to have a solid grasp of what is and isn’t working in your portfolio over time.
In addition, getting your FA to do the explanation also gives you an idea whether he/she is doing his/her job well. He/she should be well prepared to answer you about why your investments didn’t perform to your expectations. If you notice a pattern of failure your FA doesn’t seem to have a plan to address, you need to take charge. You need to be firm and insist on changes to be made.
4. Are you going to recommend changes in my financial plan?
Your FA has already told you that things aren’t working. He has also given you an explanation of why they aren’t working. Now, you need to know what’s next. Is he/she going to recommend any change in your financial plan? What are the changes? Why is your FA recommending these changes for you?
However, it doesn’t mean that change must be recommended every quarter. Some FAs might be less likely to make changes as they prefer to adopt a wait-and-see approach. You need to understand the reasoning behind his/her recommendation.
Ultimately, you must ensure that you find his/her recommendation is justified and comfortable for you. If you are not comfortable with the recommendation, make sure you voice out your opinions. You and your FA will then have to sit down for a longer discussion on adjustments to the recommendation.
5. When are we going to meet again?
Regular communication with your FA is important to ensure that everyone is on the same page. Even if things don’t go the way you expect, regular communication with your FA allows you to adapt your financial plan before it’s too late. Thus, before you end your quarterly review with your FA, don’t forget to confirm your next appointment with him/her.