Questions to Ask During Annual Review With a Financial Advisor (2024)

Hiring a financial advisor is only half thejob done. The other half is to make sure the advisor is able to deliver on yourexpectations. Financial advisors can offer you a host of services like taxmanagement, wealth management, estate planning, retirement planning, debtmanagement, and more. They are an indispensable part of your financial planningprocess and can add immense value to your life with their financial expertiseand acumen. However, to make sure the professional you hire is able to address yourconcerns and solve your queries, you must conduct a regular review.

Anannual review with a financial advisorhelps you understand the nature of your association better. Most people are unaware of the roles their financial advisors play. They are also reasonably unfamiliar with the ways in which they can leverage the expertise of their advisors to their advantage. The fear of being mocked or judged, the lack of sufficient understanding to ask the right questions, and in many cases, the sheer disinterest can harm your working relationship with your financial advisor. This can lead to incomplete or incoherent advice from your advisor, poor follow-up from your end, and above all, leave your financial goals unmet. To gain a better understanding of how you can achieve your financial goals and targets, reach out to a professional financial advisor who can guide you on the same.

You can consider somequestions to ask your financial advisor during an annual review to improve this. These questions can help you understand the professional better. It can also help you set the right expectations. Moreover, it enhances communication between both parties, ensuring neither is harmed nor neglected in any way and are able to get something positive out of the arrangement.

Here are somequestions to ask financial advisor during the annual review:

1. How have my investments performed this year?

One of the first things you can focus on in thefinancial advisor annual review checklistis the progress and performance of your investments in the past year. Most people make new goals at the beginning of the year. Therefore, the annual review can be an excellent time to review these goals for the past year and make any changes that may be required. You can make a list of all the investments in your portfolio and categorize them by the goal. For instance, a 401(k) retirement account can be put against Retirement planning. However, an Individual Retirement Account (IRA) can be used for retirement planning as well as education planning. An equity mutual fund investment may be used for a home purchase.

After you have created a similar list based on your goals and investments, you can sit with your advisor and review each of them. For instance, if your retirement goal is to save xxx by the age of 60, check the current balance of your 401(k) and see if it is on track. If not, ask your financial advisor what other things you can do to speed up your savings to reach your desired goal within the set timeline.

2. What is my current net worth?

The second question in the financial advisor annual review checklist that can help you understand your financial progress is your net worth. Finding out how your investments have performed can also point out your current financial standing. When you talk to your financial advisor, you can ask them to tell you the value of all your assets and liabilities. Your assets can include your investments, retirement accounts, bank savings accounts, emergency funds, real estate holdings, gold, etc. On the other hand, your liabilities can consist of credit card debt, loans, mortgages, etc. Ideally, your assets should overpower your liabilities for you to be in a good financial state. You can compare your present net worth with where you stood the previous year. This will help you be sure of whether or not your financial advisor has been able to help you. If you are not satisfied with your financial advisor’s performance, you can consider hiring someone new. However, irrespective of your net worth, you must ask your present or new financial advisor how you can increase your net worth.

3. What changes do I need to make this year?

It is important to share any new major life events in yourannual review with your financial advisor to inform them of your financial responsibilities and future financial liabilities. Quite a few events can impact your financial plan and demand for a modification. Changing jobs or switching careers can be one example. If you were in a public or private job that you quit to start a business, you would likely need to take a look at your finances. Starting a business can require lump sum capital. You may have to liquidate some of your assets or take on a loan which is a liability. These must be reflected in your financial plan too.

Additionally, if there is a change in your personal life, such as getting married, you may have to consolidate your assets and liabilities with your spouse. This can be a benefit as well as a problem depending on how good or bad your spouse is with their expenses. Your financial advisor can help you understand these implications well and recommend any change that may be needed. Further, life-changing events like having children, getting divorced, losing a spouse or a child, etc., can also push you to make changes. You may need to invest more to secure your loved ones financially in the future. So becoming a parent or getting married can be a good time to increase your investments. Likewise, if you are now divorced or widowed, your future financial needs may differ if you no longer have to account for your spouse in the equation.

4. Is my debt under control?

Debt management is tricky. It can bechallenging to curb expenses and get your debt under control. However, doing sois imperative for a healthy financial future. The high-interest rates of loanscan negate your investment returns and force you to dig into your savings. Debtputs you behind your goals by several years. This is why debt management is oneof the most crucialquestionsto ask financial advisors during an annual review.If you have several pending loans, finding a way toprioritize the high-interest ones can help you save some money. Your financialadvisor can also recommend investment options that can help you counter yourdebt interest payments with potential growth.

If your debt liabilities are entirely out of control, you can ask your financial advisor to help you prepare a budget, including allocating enough money to your investments and savings while clearing your outstanding debts.

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5. How prepared should I be for emergencies?

Being prepared for emergencies is a must to make sure you and your loved ones do not suffer financially and mentally. However, how prepared you should be is something that not many people concentrate on. Discussing this at length with your financial advisor can be essential in an annual review. For instance, your financial advisor’s annual review checklist can include questions like how much money do you have in relatively liquid accounts that you can access immediately or within a few days if you are in an emergency? Most people have long-term investments. While the value of these funds may be high on paper, they do not allow the option to withdraw your money without incurring a penalty before a specific date. Besides, keeping all your money in a bank account will not fetch you enough returns to counter inflation. This is why financial advisors find a middle path and divide your investments in a way that offers long-term growth as well as short-term liquidity. Ask your financial advisor how your money has been invested. Try to understand the rules of your investment accounts, such as the withdrawal guidelines, the scope of growth, the liquidity, etc.

6. Is my estate plan conclusive and updated?

Your estate plan should at all times reflect your present wishes. If there has been any change in your personal relationships, you must update the same in your estate plan and will at the earliest. For example, if you remarried in the last year and would like to make your current spouse the beneficiary of your will, make sure to make these changes on all your other accounts too. This avoids confusion at a later stage and secures your current spouse comprehensively. If you have children, you may consider setting up a trust for their use. The limitations of these trusts can be changed with time if you feel the need to. Discussing these things with your financial advisor in your annual review can be a simple way to make sure your estate plan is always up to date.

7. Do I have a healthcare and long-term care plan?

Healthcare expenses account for the majority of expenditure in retirement. Given the increasing illnesses and rise in medical inflation, making sure you have adequate savings for healthcare is a must. If you have a health insurance plan, ask your financial advisor to go through the policy document to be sure the coverage is ideal for your age and gender. If you need to upgrade your health insurance, your financial advisor can help you pick a suitable plan. Likewise, discuss the need for long-term care insurance or having adequate savings so you can afford the right help in old age. You can also ask your advisor about Medicare and the age to enroll in it. Health savings accounts (HSAs) are another tax-advantaged option that you can consider for retirement health care expenses. This can be a good way to save tax and protect yourself financially against any health concern.

8. How much am I paying in tax?

You may be paying different types of taxes like income tax, capital gains tax, inheritance tax, estate tax, etc. Try to understand what each one entails as part of your financial advisor’s annual review checklist and how the calculation is done to understand your tax liabilities. This can help you plan your withdrawals from investment accounts better. If you are in a high tax bracket, one of thequestions to ask a financial advisor during annual reviewis if you can lower your tax output. There are many ways to do this. For instance, your financial advisor may recommend tax-loss harvesting if you have suffered from any losses in the market to offset your gains. The financial advisor can also recommend shifting to a traditional account for your IRA or 401(k) to push your taxes to the future, or vice versa, depending on what you want. Another way to lower your tax payments can be through charity. However, this may not be everyone’s cup of tea, depending on your income and budget. Having said that, if you can afford to donate, you can claim a tax rebate on it. You can debate the pros and cons of all these tax savings strategies with your financial advisor and accordingly make a decision.

Other things to focus on during your financial advisor review

In addition to the questions you ask about your portfolio, goals, and needs, you can also touch upon the following topics:

1. What does your fee include?

If there is any ambiguity on what you are paying your advisor, this is an excellent time to clear the air. Setting clear goals and needs can help you understand the financial advisor’s role. You can ask them about what services they offer. If you think you have not made use of them all in the past year, you can do so now.

2. What clients are you handling?

Getting an idea about the number and type of clients your financial advisor is handling can help you find out their capabilities better. It gives you an idea of their experience and how well they can handle your finances.

3. Do you have any concerns about my portfolio?

Other than putting down your concerns, you must also ask the advisor if they have any issues. Lack of communication and interest, minimal or no follow-up, procrastination, etc., are some things a lot of clients are guilty of. If your financial advisor has any such issue, you can talk about finding a solution together.

To conclude

Reviews of financial advisorscan help you track your portfolio’s performance. It also helps the financial advisor understand what you are looking for. This improves communication and helps both parties. Annual reviews are critical. So, try to take out time for them and make a list of all vital questions beforehand. This will ensure that all your doubts are cleared. It will also ensure better assistance and faster growth as the financial advisor will be in a position to understand your requirements.

And if you feel the need to change your financial advisor after the review, you can always hire anew financial advisor. Use Paladin Registry’s free advisor match tool and get matched with 1-3 qualified advisors who may be able to help you with your unique financial goals and requirements.