Everyone who has a financial adviser should be asking them some questions. It is important for the client to think about their investment portfolio and plans every year.
The first thing to do is to ask the financial adviser how much fees they are charging. People who use a financial adviser should ask about fund, account and transaction fees. A client should determine how fees are changing their returns.
It is important to take advantage of any retirement plans, savings accounts or other financial benefits from an employer. A financial adviser should help a client determine how their 401(k) fits into their retirement plan and how to leverage other financial plans available from an employer. These may include medical savings accounts and employee stock purchase plans. If the employer offers contribution matching a 401(k), that should be fully taken advantage of. Another benefit is that the amount the employer contributes does not count toward the annual Internal Revenue Service contribution limit.
New Tax Laws
The Tax Cuts and Jobs Act passed in 2017. The law started last tax season, but a lot of people are still trying to adjust to the changes. A financial adviser should be able to advise on the new tax law. Here are some of the changes:
- Most tax brackets have been reduced.
- The child tax credit has increased.
- Alimony payments are no longer deductible from taxable income.
- The allowance for itemized medical expenses deductions increased.
- Inheritance tax exemptions have significantly increased.
Be sure to understand how much risk is currently appropriate with finances. A financial adviser should be able to help their client determine how much risk is appropriate based on age, finances, the general level of risk aversion and goals. As circumstances change, how much risk is appropriate should be re-evaluated every year.
Ask the financial adviser what other services are offered at their firm. They may offer estate, legacy, tax, banking and other services. All of those services are important for financial plans.
Asking a financial adviser these important questions may prevent their client from making huge mistakes. The financial adviser should be able to optimize finances that will benefit their client.