Broker Check

Wealth and Wisdom: 3 Questions to Ask Your Financial Planner about Your Investment Portfolio

Given the personal nature of your finances, the importance of your relationship with your financial planner naturally increases. After all, it’s not to everyone that you reveal your most intimate financial details.

And while compatibility and trust are two essential boxes to check, it’s equally important that
your financial planner can effectively deliver on the reasons you connected with them in the first place. They should have the technical know-how and skill set to understand and meet your needs.

A common responsibility often delegated to financial planners is investment management. Investing is a critical component of your financial plan because it allows you to put your money to work to build wealth, outpace inflation, progress toward your financial goals, and prepare for a comfortable retirement.

Many grasp the importance of investing, but only some strive to be DIY investors. If you’re among those who have entrusted the pros with managing your portfolio (or are considering it), there are some key questions to ask your financial planner.

Asking (the right) questions can increase your investment understanding and reinforce your confidence in partnering with a skilled financial planner who prioritizes your best interest. Whether you’re seeking to establish a relationship with a financial planner for the first time or already have an existing relationship, here are some investment questions to pose during the initial conversations or at your next review meeting:

Question 1: What Is the Overall Strategy for My Portfolio, and Does It Align with My Financial Goals and Risk Tolerance?

Your investment strategy is the roadmap designed to effectively make your money work for you. It’s crafted with your unique financial goals and risk tolerance in mind. As an investor, it’s crucial to have a clear understanding of the strategy guiding your portfolio. Some essential things to know about your portfolio include:

  • Overview of Portfolio Strategy: You might not need (or even want) to get into the
    specifics of every position in your portfolio, but understanding the overall strategy is
    valuable. It provides a high-level view of how your portfolio is structured, the inclusion of
    various asset classes, and the guiding philosophy behind investment decisions.
  • Integration of Risk Tolerance: Your comfort level with market volatility and potential
    losses should be factored into your investment strategy. Make sure that your portfolio is
    in harmony with your risk tolerance and that your financial planner isn’t taking on
    excessive or insufficient risk.
  • Emphasis on Diversification: Diversification involves spreading your investments
    across various asset classes, such as equities (stocks), fixed income (bonds), and cash
    equivalent instruments. Beyond that, diversification can extend to multiple industries,
    companies, and even geographic regions. It’s a strategic and deliberate effort to mitigate
    risk by not putting all your eggs in one basket. Diversification does not assure a profit or protect
    against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.
  • Performance Expectations: Given the inherent unpredictability of the market, it’s worth
    noting that unless your financial planner has a crystal ball, making guarantees just isn’t
    realistic. While past performance doesn’t assure future results, historical data can
    illustrate how your portfolio has performed relative to market benchmarks. A transparent
    dialogue on performance expectations will help set realistic goals and track progress
    over time.

Even if you delegate investment management to a financial planner, grasping these components of your portfolio strategy empowers you as an investor to collaborate with them in making confident, well-informed decisions that align with your goals.

Question 2: How Frequently Will My Investment Portfolio Be Reviewed?

When enlisting the services of a financial planner to oversee your portfolio (or any part of your financial plan), it should never become a set-it-and-forget-it arrangement for them. Your portfolio needs periodic maintenance, so ensure you know how frequently your financial planner intends to check in with you for reviews and hold them to it.

It’s common for portfolio reviews to happen quarterly or annually, but this can vary based on your circumstances, financial goals, and the ever-changing market conditions. These review meetings provide both you and your financial planner with the chance to:

  • Monitor Performance: Regular reviews help your planner assess how your portfolio is
    performing relative to your financial goals and market benchmarks.
  • Adjust for Changes: Market conditions, the economic outlook, personal circumstances,
    and financial goals can evolve. These review meetings provide an opportunity to make
    sure your portfolio is still in alignment with your objectives and risk tolerance.
  • Staying Informed: Ongoing reviews keep you and your planner informed about the
    progress of your investments. Even if they’re handling the management, you should
    remain aware of what’s happening with your money.

Naturally, what’s considered standard practice may not be optimal for everyone. Some clients might favor more frequent reviews, especially during periods of market volatility, while others find annual reviews sufficient. You can discuss your preferences with your financial planner to establish a review schedule that aligns with your comfort level

Question 3: What Are the Fees Associated with Managing My Investment Portfolio?

There are several ways in which a financial planner can be compensated for investment management services. Some of the most common fee schedules include:

  • Assets Under Management (AUM): Many financial planners charge a percentage of
    the total assets they manage for the client. This fee structure aligns the advisor’s
    compensation with the client’s investment portfolio size. The percentage can vary and is
    often negotiable, but it commonly falls within the range of 0.5% and 2% of the AUM per
  • Hourly or Flat Fee: Some financial planners charge an hourly or flat fee for specific
    services, regardless of the portfolio size. This method is often used when other financial
    planning services, such as retirement or tax planning, are involved in addition to
    investment planning.
  • Commission-Based: In this model, financial planners earn commissions by selling
    financial products (including investment recommendations) for clients. While still widely
    used, this method has faced scrutiny due to potential conflicts of interest since the
    commissions generated might motivate a financial planner more than acting in their
    client’s best interest.

In addition to your financial planner’s compensation for their services, remember to inquire about any additional fees, such as transaction costs or account maintenance fees.

There isn’t necessarily a “best” way for a financial planner to structure their fees; what matters most is that you clearly understand how much you’re going to pay, how you’re going to pay, and what exactly you’re paying for.

Transparency should be non-negotiable, and you should be cautious of financial planners who gloss over or tiptoe around details about their fee structures.

Collaborating with Legacy Planning to Elevate Your Confidence (and Investment Portfolio)

In a world where a multitude of responsibilities demand our attention, we understand the value of prioritizing tasks within your expertise and investing in someone to handle those that are important but challenging to handle independently, either due to time constraints or limited knowledge. If that strikes a chord with your approach to investing, keep reading.

If you’re ready to ask investment questions to increase your investment understanding and formulate an investment strategy, you’re in the right place. At Legacy Planning, we invest time in understanding your values, preferences, and current standing before we craft a strategy that’s uniquely tailored to you. To chat about how I can take you from a passive investor to an informed decision-maker, click here to schedule a conversation today.

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.


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