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10 Questions to Ask when Hiring a Financial Advisor

February 18, 2019

Financial experts run the gamut from tax preparers to CPAs who can help you with a business, to people who specialize in things like drafting wills or advising you for retirement. Finding the right financial advisor can seem like you’re dating again. With all the questions and long-term goals, you’re looking for in a match. How do you find the right type of expert, ask the right questions, and get the help you need?

 

First, like in dating, you need to know what you’re looking for. Think about what you need and it will narrow your search. It’ll be easier to seek out a financial advisor once you have a title or type of business to seek out.  With easier access to more information than ever before, reading up on topics is a piece of cake (and common) for most of us. What are you looking to do? Start searching based on your needs, so you can develop your own list. Create your own list of questions specific to the service you need.

 

Next, ask around and look at websites, reviews, and recommendations from friends and family. There might already be a connection to someone—or many someones—in your network. Once you have an idea of what you want and the type of expert you’re looking for, consider asking these questions.

 

What are your qualifications?

Before you start talking to a financial pro, make sure you know what typical qualifications are. You don’t want to hire someone with the wrong education or training for what you need.  According to the Bureau of Labor Statistics in the U.S. the education requirements are a bachelor’s degree. The certifications and licenses required will be dependent on what the advisor is working on.

 

How much and what kind of experience do you have in this field?

It’s not necessarily a deal-breaker to have a greener financial pro. It is recommended to know whether your CPA has done the type of accounting you need, or if you are a financial advisor’s very first client!

 

What services do you provide?

Even if you’ve sought out a financial expert based on one need, it’s nice to know if they might be able to help you with further services down the road. Plus, websites aren’t always all-encompassing, so you might need some clarification before you start working together.

 

What are your fees? What is your fee structure?

Some experts take a percentage of the money you make, and others have services based on flat rates or monthly fees. Knowing how they get paid helps you understand what you’re paying for their services. Advisory HQ has a list of sample fee structures based on a recent report they created for financial advisors. The charts provided will give you an average reference as to what the typical costs are for management of assets and other financial management costs.

 

What are the total fees?

In addition to your contributions and the fees of your expert, there may be other fees you need to pay. For example, if you are advisor uses a mutual fund, there may be fees associated with that account that will be added to the advisor’s cost.  Ask what your all-in costs are and be aware of how even small fees can affect your overall outcome.

 

Are you a fiduciary?

A fiduciary works in your best interest. They have both, ethical and legal duties to act in the best interest of the party to whom assets are being managed. For example, shareholders, lawyers, and guardians are fiduciaries. The biggest difference between fiduciaries and other financial advisors, fiduciaries cannot act on their own interest. They cannot benefit personally from the management of assets while other financial advisors can.

 

What kinds of tools or guides do you have to help me?

Many financial experts can offer specialized tools or calculators. These tools will help you understand the financial potential of their services. Ask if they have more information or collateral they can send home with you for your own research and learning.

 

What services are available through your website or app?

Many millennials prefer to do tasks digitally. We want the ability to check on accounts 24/7 on our phone or computer. Knowing if there is an app or website that is available and mobile friendly is helpful when picking an expert.

 

How often should we meet or check in? What would our relationship be like?

When you first start a retirement plan you might not see much growth or movement for quite a while. Therefore, it’s likely won’t need to interface much with your expert. Once you have hired a financial pro, don’t be afraid to ask them some questions. You should be comfortable or checking in whenever you’d like to get their perspective. You could set up a yearly call about investments for a more regular update.

 

What kind of goals should I set?

You and your financial expert will want to have a conversation about why you’re looking for this product or service and what you hope to get out of it. He or she will help you understand if your desires are on point for what they can offer.

 

Finally, you want an expert who is a good fit. Some people have a special situation like owning their own business or freelancing. In that case, you’ll want a financial expert who understands your needs. You could want an advisor who cares more about educating clients versus someone who simply gives their opinion on what you should do.

 

Beyond that, you might have preferences that would be important to talk about during an interview. Many millennials have strong feelings about what causes to support. Did you know you can ask a financial advisor to ensure that your investments aren’t doing anything you wouldn’t agree with? For example, you can have a financial advisor invest in companies that are known for being socially or environmentally responsible only. You can also avoid investments that include controversial companies or those with values you don’t agree with.  It’s okay to shop around and find someone whose personality or experience fits best with you! It isn’t always a guaranteed marriage, but you have to start somewhere.

 

6 Reasons for Hiring a Financial Planner 

 

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Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

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Group of friends taking photos of food for social media
2020-05-12
Is Social Media Ruining Your Finances?

Due to the coronavirus pandemic and shelter-in-place restrictions, people are spending more time on social media than ever.    By Kat Tretina Kat Tretina is a writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.   While social media can be a fun way to pass the time, it can have a negative impact on your finances. According to Schwab’s 2019 Modern Wealth Index Survey, more than a third of Americans said their spending habits were influenced by images and experiences shared on social media. Regularly using social media could cause you to overspend and put your financial goals at risk.    If your social media use is damaging your finances, here’s how to take back control.   

Signs your finances are getting derailed by social media 

Using Snapchat, Instagram, or TikTok isn’t necessarily a bad thing. It’s all about moderation. But there are some tell-tale signs that your social media use is hurting your bank account:   

1. Falling for FOMO

Seeing friends and old classmates’ vacation photos can give you a severe case of FOMO— fear of missing out. Those glamorous photos can cause you to want to book your own expensive trip.    However, you should know that few people can really afford those exotic vacations. According to BankRate, the average person spends less than $2,000 per year on vacations. The Federal Reserve reported that 40% of Americans can’t cover a $400 emergency expense, so a pricey vacation — or even a weekend trip to the beach — is out of reach for many.    While some people may save for months or years to pay for their vacations, many more turn to credit cards to finance their trips. Chasing their lifestyles could damage your bank account.   

2. Believing in the fantasy

With so many people posting beautiful photos of lavish purchases, it’s easy to believe that everyone is living a more luxurious life than you. But what you see on social media isn’t always real life.    You have no idea how people are paying for those luxuries. They could be well off, or they could be in extraordinary debt.    One well-known influencer racked up $10,000 in credit card debt to keep up her Instagram persona, filling her feed with pictures of dinners out, new outfits, and online purchases. And companies exist that allow users to hold fake private jet photo shoots   Take the photos you see with a grain of salt and don’t compare yourself to others.  

3. Purchasing on impulse

Social media ads are incredibly targeted; they’re based on your search history and likes, so you’ll likely see ads for products that will appeal to you. In fact, a 2019 survey from VidMob found that one-third of Instagram bought an item directly from an Instagram ad.     With one-click purchases and saved credit card information, it’s easy to make a purchase in an instant before you can really think it through.    If you find yourself making purchases while scrolling through your social media feeds, you may be wasting money.   

How to stay on track

If your social media use is compromising your finances, use these five tips to get back on track:   

1. Limit your screen time

While it may seem difficult during shelter-in-place orders, set limits on how much time you spend on social media. You can use your phone’s screen time settings to see how much time you currently spend on your phone. Use apps like Moment, Freedom, and SelfControl to limit your social media access.   

2. Keep visual representations of your goals in front of you

To combat visuals of vacations and other purchases, keep visuals of your goals handy. For example, if you’re paying down student loan debt, keep a visual graph of your progress on your phone or saved to your computer desktop.    (Hint: Need help paying down your debt? Consider student loan refinancing. Our customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans with Education Loan Finance. You can get a rate quote without affecting your credit score.*)   If you plan on buying a home or a car, keep a picture of your dream purchase saved. You can also create a Pinterest vision board of what your goals are to help keep you focused.    After all, taking control of your finances can help you live lavishly once your debt is repaid.   

3. Set a waiting period before making any purchases

Institute a waiting period before making any purchases to curb impulse buys. Make yourself wait 72 hours before making a purchase.    If you see an item you want, save it. If you still want the product three days later, you can give yourself permission to buy it.    You may find that you completely forget about it, or that it’s less appealing after a few days. By making yourself wait, you can ensure that your purchases are things you really want and need.   

4. Curate your feeds

Social media can be fun, but it can also make you feel bad about yourself and your life. To combat those problems, spend some time eliminating feeds and unfollowing accounts that make you feel inadequate, and only follow accounts that make you happy.    Feeds that feature cute dogs? Follow! Home decor feeds with throw blankets and lamps that cost more than your rent? Unfollow.   

5. Practice gratitude

Researchers have found that focusing on things that you are thankful for is proven to make you happier. Every day or at least once a week, set aside some time to jot down things you are grateful for that happened during the week.    They don’t have to be big things. Cooking an especially tasty dinner, being able to spend time binging Netflix with a friend or partner, walking your dog, or still having a paycheck during a difficult economic period are all things to be thankful for right now.    By focusing on the good things that are already in your life, you’re less likely to be affected by FOMO and social media’s influence.   

Managing your money

Using social media can be a great way to connect with friends and family and pass the time, but it can negatively impact your finances. But by using these tips, you can combat its effects and manage your money.   
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Millennial reading in living room
2020-05-11
Forget the Joneses: Why a Modified HENRY Lifestyle May Be Better

If you have ever been tempted to get the latest phone or newest trendy clothing, you may be familiar with the feeling of needing to keep up with the Joneses. Now, some millennials are feeling the pressure to live up to a new standard. As opposed to the proverbial Joneses, it’s the HENRYs. Although HENRYs have their downfalls, just like the Joneses, with some financial tweaks you can set yourself up for a bright financial future and avoid the pitfalls of being a HENRY.     By Caroline Farhat  

What Is a HENRY?   

HENRY is an acronym that stands for “High Earner, Not Rich Yet.” First used in a
Fortune magazine article in 2003, it’s a term that describes millennials who typically earn over $100,000 but feel broke. According to financial experts that help HENRYs with their financial goals, the typical HENRY is: 
  • Earning more than $100,000 a year as an individual or $150,000 as a couple
  • A millennial, with the average age being 32 years old 
  • Working in any industry, including software engineering, digital marketing, journalism, law, medicine and finance 
  • Usually living in high cost of living areas with the higher-paying jobs, like California, New York and Washington D.C., but can live anywhere 
  • Saving money, but not enough. The typical HENRY may have between $15,000 and $20,000 saved. Although this may seem like a lot compared to the 58% of millennials that have a savings account balance under $5,000, based on the percentage of income earned, the savings are minimal.  
 

Problems HENRYs Face

Many millennials who are considered a HENRY feel like they are living paycheck to paycheck, however, they make it a priority to pay for expensive gym memberships and dream trips. Here are some problems HENRYs face and how to fix them:   

Lifestyle Creep

Lifestyle creep refers to the phenomenon in which spending on discretionary items increases when income increases. It can be dangerous to increase spending each time your income increases because it can derail future financial plans. HENRYs often give into lifestyle creep because they have the mentality that they deserve the luxuries they have become accustomed to.   The Fix: To fight lifestyle creep, prepare a budget with the goal of trying to save at least 10% of your income a month or 20% or more if you do not have any debt. Keep your budget the same even if your income increases and be sure to save the difference in income. If you are able to lower your expenses, save that difference too. It’s recommended that the savings go to a retirement account and building an emergency fund.      

Student Loan Debt

  Student loan debt is a major strain for many HENRYs. According to one financial expert, 40% of her clients who are considered HENRYs have student loan debt. HENRYs owe an average of $80,000 in student loans, much higher than the average $33,000 for millennials in 2019. However, for many HENRYs, student loans helped them achieve the education they needed to obtain the high wages. The best way to deal with the student loan debt is to see if you’re missing out on ways you could be saving money on your loans and create a plan to pay them off quickly.   The Fix: Student loan refinancing can be extremely beneficial for many student loan borrowers.* Refinancing student loans can save you money on your monthly payment and in interest costs over the life of the loan. This will allow you to build more wealth faster and feel less strapped for cash. So how much can you save?    Let’s say you had $35,000 in student loan debt at 7% interest with a 10-year repayment term. By the end of your repayment term, you’d pay a total of $48,766. Interest charges would cause you to pay back $13,766 more than you originally borrowed.     If you refinanced your student loans and qualified for a 10-year loan at just 5% interest, you’d repay $44,548. Refinancing your debt would help you save $4,218.     Use our student loan refinancing calculator to find out what your potential savings could look like.*    

Living for the Now

  HENRYs like to focus on the now, and although it is good to live in the present and appreciate what you have, that may not be the best mindset for your finances. HENRYs have to accept that the future will come and they have to prepare for it. But preparing for the future doesn’t mean you have to make a ton of sacrifices! It’s completely possible to enjoy worldly adventures and designer brands now and still save for the future.    The Fix: Decide 2-3 future goals you’d like to achieve and examine the type of financial situation you’ll need to make them happen. Do you want to save for a down payment on a house? Plan to start a family soon? Or are you looking to retire early? Once you have your goals, set up automatic transfers to a special savings account so that you’re not tempted to touch the money.  

Cost of Living 

HENRYs face a higher cost of living because income increases have not kept up with the rising cost of housing and medical expenses. Many also face the added stress of living in high-cost metropolitan areas.   The Fix: Try to cut your living expenses by choosing to live in the suburbs where housing costs may be lower. If cutting your living expenses is not an option, decide what discretionary expenses you can lower. For example, if you are used to getting takeout multiple times a week, try swapping easy home-cooked meals for at least half of the time.  

Conclusion

If you realize you are a HENRY, this doesn’t mean financial doom for you. Making these small tweaks can help you continue to live the lifestyle you enjoy while working towards a richer future.  
  *Subject to credit approval. Terms and conditions apply.    Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Chart showing a good credit score
2020-05-06
Are Student Loans Impacting Your Credit Score?

Even if you only have a basic knowledge of how credit scores are calculated, you may be aware of the fact that taking on debt and then paying it off in a timely and consistent manner is generally considered one of the best ways to build good credit, while late and missed payments can show up as black marks on your credit history.  What you might not know is that different types of debt can have different ramifications where your credit is concerned.   For example, the balances carried on credit cards are considered to be a form of revolving credit, according to Investopedia.  Lines of credit also fall into this category.  This type of debt includes a maximum limit and accounts are considered “open-ended”, which is to say, you still have access to agreed-upon funds even after you’ve borrowed and paid back up to the maximum.   Then there are installment credit accounts, including loans for houses, cars, and college tuition, just for example, which Investopedia characterizes as separate from revolving credit in that there are terms attached which specify the duration for payments, the number and amount of payments, and an end date for the loan.  Further, once payments are made, the money cannot be borrowed again.   These types of debt affect your credit score in different ways.  Revolving debt is potentially more damaging, as carrying high balances on credit cards could have an enormous impact on your credit score.  Revolving credit determines 30% of your score, according to MyFICO, although there are certainly other factors involved, including:
  • What is owed on all accounts
  • What is owed on different types of accounts
  • The number of accounts with balances
  • The percentage of revolving credit in use (credit utilization ratio)
  • The amount still owed on installment loans
  Of course, if you find that revolving credit is severely impacting your credit score, Investopedia suggests that paying it down also has the potential to deliver significant improvements, and some people even utilize installment credit (personal loans) to pay off revolving credit as a means of lowering interest rates and shifting to a less impactful form of debt. Although revolving credit accounts for a major portion of your credit score, installment loans can also have an impact in both positive and negative ways, according to an article from Student Loan Hero.  Here’s what you need to know about how student loans can impact your credit score.  

How Can Student Loans Help Credit?

Because installment loans aren’t weighted as heavily as revolving credit when determining credit score, they may have less potential to damage your rating.  In fact, FICO statistics show that approximately 38% of consumers with student loan debt totaling over $50,000 fall enjoy a FICO score of over 700, which is considered the average score for American consumers, according to a recent article by Fox Business.  Those in the 740-799 range are considered to have very good credit, while a score of 800 or higher is considered exceptional.  By comparison, about 28% of consumers with student loan debt over $50,000 have scores under 599, which is considered a poor credit rating.   What does this mean?  It’s difficult to say, because credit ratings are based on so many different factors aside from student loan debt.  However, when managed appropriately, student loans, like any type of installment loans, could certainly improve a credit rating.   While revolving credit accounts for 30% of a credit rating, payment history is actually more important, delivering a whopping 35% of your credit score.  If you pay your monthly student loan bills on time and in full, you should be able to steadily build good credit over time, especially when you take the same care with all your other financial obligations.  Of course, this can be a double-edged sword, as well.  

How Can Student Loans Hurt Credit?

While student loans don’t necessarily have the same major detractors as revolving credit, they still have the potential to harm your score if you don’t manage them appropriately, and even a single slip could cost you.   Even if you’re a responsible adult and you’re diligently paying down debt, it can be hard to juggle the many student loan payments associated with years of schooling (and taking out new federal student loans each year).  Something could slip through the cracks.  When this happens, it could have a negative impact on your credit score.   Even worse, the better your credit score, the more a late or missed payment could impact you, according to MyFICO.  This is because a higher score reflects less risk.  While a consumer with a lower FICO score is known to have some credit issues and is therefore somewhat less impacted by future problems like late or missed payments, someone with a stellar credit rating may fall further for similar infractions because the risk was not anticipated.  It doesn’t seem fair, but when paying down student loan debt, it’s important to understand the potential impact.  

Why Does the Impact of Student Loans Matter?

Your credit score is used to determine whether you are approved for future loans and to calculate the interest rate and terms you are eligible for, according to Student Loan Hero.  While a single late or missed payment isn’t going to tank your score, and you can always speak with lenders about removing black marks on your credit report once you’ve rectified a mistake, you naturally want to maintain a high score if at all possible so as to improve your odds for loan approval and the best terms down the road.  

How Can I Improve My Credit Score While Paying Off Student Loans?

Even if you’ve had smooth sailing so far, you may be interested in the benefits to be gained when you refinance student loans.*  If you currently juggle several student loans and you’re worried about the possibility of missing a payment somewhere along the line, you could refinance and consolidate student loans into one convenient payment.   In some cases, you might even save money when you refinance student loans by lowering interest rates or transferring variable interest loans to fixed interest options.  It depends on your situation, but it’s something to consider when it comes to controlling how student loans impact your credit score.  

ELFI Credit Series: 5 Habits for Good Credit Hygiene

 
    *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.