What are Some of the Important Questions
Financial Consultants Ask to Understand Investor's Financial Position?
Normally, an experienced financial consultant will ask several questions to figure out your financial needs and requirements. As such, in the following sections let us go through some of the common question you can expect from a consultant. Such questions are primarily asked to judge your risk tolerance, investment objectives, any specific needs and investment constraints.
Investment Needs and Common Questions Financial Consultants Ask
Questions for Comprehending Risk Tolerance You Have
What do you understand by risk?
Investment advisors tend to measure risk in different manners, as for instance, in the form of portfolio volatility or as getting returns which are well below the minimum level of return you expect.
It is also possible that you have developed your own perspective about risk and such perception will be helpful for financial advisor to clearly understand capacity you will have of bearing certain amount of risk. You need to be aware of the fact that risk tolerance level you have is determined by your willingness as well as ability to take certain amount of risk.
A financial consultant will generally ask several questions to judge your willingness as well as capacity to bear risks. Some of the questions you can expect would be:
- What is the amount of decline you are ready to accept in your portfolio in any given year?
- How much is your present savings and household income?
- What is your definition of a large loss and at which level it would be too much for you?
- What type of effect losses will have upon your lifestyle?
By getting answers to these questions your financial consultant will be able to properly understand the risk tolerance level you have and accordingly develop a portfolio which matches level of your risk tolerance.
Questions for Determining Suitable Investments
Some of the questions you can expect from a financial consultant would include:
- What is the time frame you have in mind for achieving your financial goals?
- Can you tell something about your present tax situation?
- What is the total asset value that you want your financial advisor to manage?
Questions for Ensure Investment Strategies Do Not Clash with Legal or/and Tax Strategies
An advisor will also try to ensure that whatever investment strategy is developed can be seamlessly implemented and it will go against any legal or/and tax strategies you are currently utilizing.
Few of the questions which will help your financial consultant better understand the situation would consist of:
- Are you presently working with some other advisor, as for example, an estate attorney or an accountant?
- Do you really require these advisory services?
- Are there any pre-existing legal or/and tax strategies that affect your present investments?
- Would you allow us to coordinate with all the other advisors working for you?
A Final Note
Thus, to conclude we will say that investment decisions tend to be quite complex with several facets to be looked into. A Financial consultant will try to clearly understand your present situation so that investments can be planned in a much better way.