Ask an Advisor: What Questions Should I Ask?

Key Takeaways

There are many benefits to working with a financial advisor. You get to work with a professional who can help you determine how much risk to take and which investments fit your goals. You can also have regular check-ins to monitor your progress and get your questions answered.

But how do you know if you’re always asking the right questions? Financial consultants Kyle Ray, Kory Klossner and Eric Martinez share the top three questions they hope clients will ask them right now.

1. Should I Keep My Money in Cash (or Get Back Into the Market)?

Cash equivalents (like money markets) have a place in a diversified portfolio—especially when they’re there for the right reasons. The question about staying in money markets, how long to stay in them, and when to get back in the market tops our list because the answer can be critical for clients’ short- and long-term goals. It’s also a timely topic for today’s higher interest rate environment.

For some investors, parking money in cash may not make the most sense for their goals. “Most people are attracted to money markets because they seem relatively safe and comfortable,” says Kory. Money markets are also potentially attractive now because of their higher yields, but we may need to explore whether there are better opportunities for the client’s money.

Other topics to consider are how long the higher interest rates will be around and when yields could pull back. “We tend to see rallies in markets with lower-interest rate environments,” says Kyle. However, the timing can be anyone’s guess, even if you listen closely to what the Federal Reserve signals from time to time. They can always change their minds depending on the environment.”

Kory agrees. “It is possible to wait too long to get back into the markets. If you are trying to stay in cash products and yields come down, you may miss the mark on accelerated growth in other parts of the markets.”

Decisions about whether to get into or out of the markets are difficult and may seem like an either/or proposition. That’s why we like a more measured approach. “We’re not advocating jumping into anything,” Kory continues. “Instead, our approach is to help the client find a disciplined strategy that meets their needs in the right way.”

Some clients may not want to make a decision at all, especially if they’re comfortable with their current situation. “Going with what’s comfortable may not get you the growth you need later on,” says Eric. For clients in cash, it may be time to explore a more diversified solution for what they want to do in the long run rather than just be in a place of comfort.”

“Investors may also choose cash and keep it there out of fear,” says Kyle. “If you’re in cash because you want to avoid volatility or you’re worried a market bubble is on the horizon because of all the stock market highs this year, neither of those may be the best reason to be sitting on the stock market sideline.”

He likes to remind clients that the markets always have highs and lows, and cash may not help their investments keep pace with inflation. “There’s a lot to consider when you’re talking about when to get in and when to get out, so for me it’s important to have that conversation before they decide to move to cash or before they decide to get back in the markets.”

The discussion can include what the client’s goal is for the money, how they feel about risk (especially during volatile times) and when they will need the money.

2. Can I Really Afford to Spend That Much in Retirement?

This may sound like an unusual question, but we find that many of our clients—who have diligently invested for years for a comfortable retirement—are reluctant to spend the money they worked hard to save. Why, and what’s the remedy?

“Without the regular income from a job, people are often afraid to spend,” says Kyle. Of course, you want to make sure you can cover your essential expenses, but if you have a well-funded retirement, there’s nothing wrong with spending money on yourself and your so-called “bucket list.”

“There are so many ways an advisor can help you figure out how much you can potentially spend and still plan for your investments and savings to last as long as you need them to,” says Kory. From traveling to spending time with friends and family to strategic gifting opportunities, an advisor can help you sort through your retirement to-do list.

“Running scenarios is a great way for retired clients to see that they really can afford to spend some of their retirement savings on themselves, and they don’t have to skimp on things they would have otherwise purchased had they still been working,” says Eric.

Kory agrees, “If you have the funds, for example, there’s no need to drive around in a car that will barely get you to your destination. I see too many of my clients choosing to maintain an older vehicle when it’s probably more economical to purchase a new car—especially when they can afford it.”

While the issue of “underspending” in retirement may not be every retiree’s experience, we see many of our clients in this same situation. “Many investors are over-dialed on retirement, but that’s where a plan can help out so much,” says Kyle. “The plan can help tell them the max they can spend each year.”

And the spending possibilities go beyond your own needs. Do you want to help a loved one financially right now? Is there a charity that you’ve always wanted to support? Is there a child in your life who could benefit from college savings? There are many ways you can choose to allocate your nest egg beyond spending the money on yourself, and an advisor can help you figure out how much, when and the best way to give the money.

“This is where financial planning is at its best,” says Kory. We have software to simulate over a thousand portfolio stress tests, with forecasts out five, 10 and 20 years, including in great and challenging markets. This way, we can generate a probability of how successful the investor may be and what their retirement spending could look like.”

Eric says, “Utilizing these simulations allows clients to see realistically that they can be okay, depending on their comfort level” While these hypothetical scenarios are never a guarantee of future performance, it can be helpful to see what kind of outcomes are possible—good and not so good.

3. How Much Is Financial Advice Really Worth?

Over the years, many studies have attempted to measure the extra returns an investor could potentially get when they use a financial advisor versus managing money on their own. The averages vary, but we’ve found that performance isn’t the only thing investors are concerned about.

Research confirms it. According to Morningstar,¹ investors say they use (and stick with) their financial advisors for three main reasons: They’re uncomfortable handling their financial plans alone, they’re confident in the quality of financial advice they’re already getting, and they appreciate ongoing behavioral coaching for their finances. Investment performance was fourth on the list. “The true value of financial advice depends on the individual asking for advice,” says Kory. “It all comes down to that person’s time, desire and expertise. You need those three things to do your own money management.”

And if one of those things is missing, you might benefit from professional help, even if you take pride in being a self-directed investor. “The relationship an advisor offers can be a good fit for a broad range of people,” he continues.

Confidence in your chosen advisor is key, says Eric. “Whenever my clients share their advice experience with friends, I want them to have a meaningful discussion about working with me. Charts and graphs don’t change people’s minds, people change people.” That trust and personal connection are often important for investors’ peace of mind.