8 Questions Financial Advisors Should Be Ready to Answer from Potential Clients

January 14, 2020 - Stephen Van de Wetering

questions to ask a financial advisor

As you know, your clients and prospects have access to a wealth of information at their fingertips. They also have an unprecedented number of choices, thanks to the internet. Back in 2011, Google told us that consumers consult an average of 10 sources before making a purchase — that’s including traditional (print, broadcast, in-store displays, word of mouth) and digital (websites, social media, reviews) sources. 

In a similar report, Marketing Week compared consumer touchpoints from 2000 to 2015 and found that on average in 2000, only about 7% of consumers used four or more touchpoints (i.e., physical location, website, social media) when making purchases.  Five years later, nearly 35% of consumers use four or more touchpoints. 

In order to attract and retain the types of investors you want to grow your firm, you’ll need to anticipate prospective clients’ questions and respond to them transparently, confidently and, of course, accurately. Below are some of the most common questions investors ask (or are advised to ask) of prospective wealth management firms.  

8 Questions Potential Clients Might Ask a Financial Advisor

What Will You Do to Recession-Proof My Investments?

Some industry watchdogs have expressed concerns that we have an overvalued U.S. stock market, which might lead us to another devastating recession, despite one of the largest economic expansions in our country’s history. 

You’re not a magician and you can’t predict the future. Your response, as you well know, depends on your clients’ goals — are they preparing for retirement soon, or are they seeking an aggressive growth strategy? 

You can educate potential clients on investments that have historically been viewed as recession-proof. And you can explain to them the tools you use to monitor the markets and their investments. They’ll feel more comfortable working with a firm that uses the latest technology to monitor the markets and their investments so you can make recession-proof investment decisions. 

What Is Your Investment Philosophy?

There is no single right answer to this question of investment philosophy. When investors are vetting financial advisors, this question shows up on almost every list of questions they should ask potential investors. Dave Ramsey recommends it, the Motley Fool recommends it, and so does Nerdwallet. They all advise that this question is important because the answer helps the investor see your commitment to your clients, as well as your long-term investment strategies.  

The best answer demonstrates your integrity, knowledge and your commitment to doing what’s in the best interest of your clients, even if that means telling them what they might not want to hear.

How Secure Is My Information? Who Has Access to my Assets?

Cybersecurity is on everyone’s minds when they share and access highly sensitive personal information online, including their investment portfolios. The weakest link in the security chain is the human link.

Share your security policy with your clients and prospects, to let them know the steps and measures you take to ensure their assets are safe in your hands. For example, at Empaxis, we let our clients know that everyone in our organization plays an important role in data security. We have a data security policy that we update and share companywide regularly. We also have varying levels of access depending on each employee’s responsibility and job title. For instance, our back-end developers cannot access our clients’ account information; likewise, our client relationship managers cannot access the back end of our platform.

There are many ways investment managers can secure their clients’ data, which we cover in this related post. 

How Can I Access Information About My Accounts?

Your prospective clients will want to know how you’ll communicate with them on a daily, weekly or monthly basis. Are you available at a moment’s notice if they have a question? How often will you send information about their portfolios’ performances along with advice on what to do next?

Will you use an investment management platform that they can access 24/7 from any internet-connected device? Or will you email them monthly reports with spreadsheets and summaries?  

Today’s consumers and investors expect to be able to access their banking and financial information across multiple devices, at any hour of the day. Firms that don’t meet the demand for always-on account access are going to get left behind. 

How Do You Decide What My Asset Allocation Should Be?

Potential (and existing) clients want to be assured that you’re looking out for their best interests and that you’ll make allocation decisions based on their needs, not yours. Talk to them about how you’ve approached managing your own investments, as well as investments of other clients (without revealing names or personal information, of course), to show them that you’re not a one-size-fits-all firm. 

If you use a turnkey asset management platform, you’ll be able to use real-time data and machine learning to gain valuable insights and make data-driven decisions that are in their best interests. 

What Investment Benchmarks Do You Follow?

Your prospective client is probably looking for an answer like the S&P 500, the Dow Jones Industrials, bond indexes or something that assures them that you’re using a benchmark to evaluate the performance of their investments. 

Additionally, firms that use a TAMP, can take advantage of the virtual data warehouse (not a database — a data warehouse) that aggregates information from multiple systems into one place, which helps investment advisors create personal benchmarks for each of their clients. The real beauty of a TAMP is you see information from an investor’s financial plan married with information from the portfolio accounting system, all in one place. 

How Do You Get Paid? How Much Do You Charge? What Are My All-In Costs?

Your prospective clients know that you deserve to earn fees for managing their investments and assets. They expect to pay you to do your job, so don’t tiptoe around the answer. They don’t like being surprised by hidden fees, so this is your opportunity to be transparent and explain not only how much you will charge but also why you are worth the fees. You can explain how your technology, processes and people protect their investments and, in the end, are there to help them maximize their income. 

As fee compression has been eating into profit margins for asset managers, many firms have been turning to more budget-friendly technology that improves the return on their clients’ investments while also reducing overhead costs for the financial firms. A platform such as TAMP1, for example, frees up your wealth managers’ time by getting them out of spreadsheets — reports are automatically generated and shared through the cloud-based platform. 

What Other Questions Do Your Prospective Clients Ask?

Talk to us and let us know what other concerns your prospective clients have. What stops them from becoming a long-term client with your firm? What makes them select your competitors over you? 

We’d love to give you a free demonstration of the TAMP1 web-based platform so we can show you how this technology can help you wow your clients while you lower your operating costs, increase your accuracy and manage more products through a single integrated platform.

Learn more about choosing a TAMP by downloading our free ebook, “Why Move from Client Server Software to TAMP.”