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Questions You Should Ask Your Financial Advisor

The coronavirus pandemic shook the financial lives of many. The stock markets took a major tumble and unemployment claims reached the 40 million mark worldwide. This undoubtably can create uncertainty, especially as the economy itself is still coming to terms with the consequences of the COVID-19 crisis.

Financial planning during tumultuous times such as these are always challenging however, it is the optimal time to review one’s personal financial health. Adding to this, the COVID-19 situation and the instability of the current economy. Trying to figure out what to do for your personal financial health is even harder. Luckily, financial advisors can help you navigate these seemingly treacherous waters. However, you do need to make sure you ask the right questions and ensure that you receive the information you need. If you are scheduling a meeting, here are five questions you should ask your financial advisor now.

1. Is My Portfolio Too Risky?

Economic downturns leave many investors panicking. Stock prices can fall dramatically, reducing the value of a portfolio substantially in mere days. Reacting to such events by making unnecessary and sudden adjustments to your portfolio is not the solution. Asking your financial advisor to review your portfolio in terms of its composition, and also your current circumstances is.

Everyone is different and as such, your financial adviser will also assess your attitude to and tolerance for risk and if the current portfolio is aligned with this.

Your investment should not be giving you sleepless nights. If it is, you should contact your advisor today.

Usually, investments should start shifting toward more conservative options as a person reaches retirement, providing them with a degree of security. If yours hasn’t been rebalanced recently (or ever) to account for the passage of time, examining your investment choices from that perspective is a smart move. That way, you can make any necessary changes to ensure that you are still on track to reach your objectives.

2. Will My Withdrawals Be Affected?

It may be that your investment is providing you with an additional or retirement income. An important thing to consider and ask your advisor is the impact on this in a market downturn.

It is important to evaluate any income requirements with your advisor during these times. It could be that upon assessment, there is another wealth source which can be explored as an alternative drawdown for a period of time. This would be with the intention to assist a depressed portfolio during its recovery mode.

During this conversation, your financial advisor can also review your portfolio composition to ensure that any necessary withdrawals are being taken from an asset(s) which is best suited for the situation and discuss any changes if required.

3. How Can I Improve My Financial Situation?

Many people are facing financial hardships. Along with declining portfolio values, you may be contending with job losses, supporting adult children who’ve been laid off, business declines, loss of medical insurance (due to job loss), reduced rental property income, amongst other things.

Should your financial situation have changed, it is important that you communicate this to your financial advisor. With a full assessment conducted, strengths of your position can be identified so a plan can be formulated or adjusted to support other areas requiring more attention.

With a clear plan and purpose to hand, you can take comfort in the knowledge that you are again on the right path in terms of financial security and success

4. What Is the One Thing I Should Do Right Now?

When you ask this question, you’re essentially requesting that your financial advisor give you a single priority. It lets you know what they believe is the most critical action you could take based on the current situation.

This approach is particularly beneficial if your financial advisor tapped on several possible options during your conversation. It not only forces them to prioritise their recommendations, a move that may give you better clarity, but it also gives you insight into which adjustment may have the largest positive impact. Essentially, it creates an opportunity for focus, something that could be vital for solid decision-making.

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