Do you have the right advisor?

Ask yourself these questions to see if you're getting real value from your advisor.

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Key takeaways

  • When you work with an advisor, consider whether your plan is built around your full financial picture, accounting for taxes, insurance, estate planning, and your investment needs.
  • Proactive planning can help you understand the risks you're taking and how your investments might perform in uncertain markets.
  • To help you keep more of what you earn, fees should be transparent, and where possible, efforts should be made to increase your after-tax returns.
  • It helps to work with investment professionals who can draw on a wide range of experts and products to build a portfolio that meets your needs.

After all the recent uncertainty caused by COVID-19, now may be good time to get a fresh perspective on your financial plan. This can help you identify areas where a new direction may be warranted, or provide assurance that you're on the right path and working with the right advisor for you.

If you are working with a financial advisor, here are some questions to ask yourself:

1. Does my advisor really understand my values, risk tolerance, financial situation, and goals?

It may seem obvious, but your plan should be focused on you. That means your advisor should take the time to fully understand your reasons for investing and your priorities. Only by doing that can your advisor help you choose investments that reflect your values, your goals, and your comfort level with risk. It all starts with having an open relationship and clear communication.

How important is this relationship to your long-term success? Industry studies estimate that professional financial advice, when coupled with assets being professionally managed, can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.*

2. Is the focus only on my investments or on my full financial picture?

Of course, the way your money is invested is an important part of any long-term plan. But investments are only part of the story. In helping you decide how your money is invested, your advisor should be looking at many aspects of your financial life. After all, when it comes to planning, everything is connected.

A financial plan can help you achieve long-term goals, like retirement, plan for unexpected shocks, like a job loss or a health event, and address concerns about future generations. By considering your full financial picture, your advisor can help you spot vulnerabilities in your plan and suggest steps to address them.

Of course, any plan should be flexible enough to meet your changing needs. As your life evolves, your plan should too.

3. Am I taking advantage of tax-smart strategies designed to grow and protect my wealth?

Working with an advisor who understands your priorities and preferences can help you preserve and grow your wealth. For instance, can your advisor help you access tax-smart investing techniques—like tax-loss harvesting, deferment of capital gains, and strategic use of municipal bonds—to help you keep more of what your investments earn?

Over time, even a little tax savings each year has the potential to make a significant difference. And remember, these opportunities can arise throughout the year. Is your investment manager on the lookout for these opportunities throughout the year or only at tax-time?

For many people, passing on wealth to heirs or donating to a beloved charity or cause is a crowning life achievement. It's important to understand how your plan takes into consideration your family's long-term needs—for the next generation and beyond. Your advisor should be a quarterback, providing guidance around your estate and charitable giving, and helping to establish your long-term legacy.

Read Viewpoints on An all-in-one wealth transfer checklist

4. Has my advisor really explained the kind of risk I'm taking on and the implications of different market conditions on my investments?

As we've learned, life doesn't always go according to plan. It's critical to have an understanding of what could happen when you're confronted with the unexpected.

Your advisor should work with you to help you understand the types of risk involved with the way you're invested and the impact of different market conditions on your portfolio. These kinds of conversations can help you develop a financial plan that balances the goals you're trying to achieve with your feelings about risk.

Read Viewpoints on Test drive your investment strategy

5. Am I getting the best value with regard to the fees I pay on products such as bonds?

An important part of getting value from your relationship is understanding what you're paying. After all, fees can eat into returns, which over time can have a significant impact.

But remember, it's not just what you pay but how fees are structured. Do your fees vary depending on the types of investments you own? Are there lower-cost alternatives that may offer similar returns?

For example, bonds are an area where it's important to understand what you're paying. When you purchase individual bonds, firms generally charge a mark-up, which can vary significantly. With bond yields historically low, you'll want to pay particular attention to transaction costs when building a bond portfolio. The same goes for other costs related to investing, such as commissions, expense ratios, and account fees. Knowing what you're paying is critical.

Read Viewpoints on How much am I paying for my bonds?

6. Do I have access to the kinds of investment products and expertise I need to reach my goals?

Your situation is unique. The investment plan you and your advisor work to create should be unique too. That starts with having access to a wide range of investment options that can be configured around your goals, your feelings about risk, and your investment preferences. It can also be valuable to work with a firm that has analysts embedded in countries throughout the world. With boots on the ground, they can offer insights and expertise on local economies and businesses that could benefit your portfolio.

Your advisor should then take the time to understand your priorities and work with you to build around them. This can include familiarity with a variety of topics that are key to your financial life, access to both in-house and external experts, and the ability, depending on the assets you have with your firm, to work with other financial professionals on your team, such as your accountant or your attorney.

7. Do I have access to the kinds of research tools that will enable me to make smart decisions on my own?

Access to research tools is a must. Whether you're interested in researching your own investments, analyzing trading ideas, or test driving important life choices, tools can help you make smarter decisions.

The choice of a financial firm is one of the most important decisions you'll make. After all, it's about your money, your life, and your legacy. If you're not sure you're in the right place, get a fresh perspective by asking yourself the questions outlined here.

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