What Questions Should I Ask My Financial Advisor During Annual Review?

An annual review with a financial advisor is an opportunity to evaluate your financial standing and ensure your plan aligns with your objectives. Preparing questions beforehand maximizes the session’s effectiveness, ensuring all relevant aspects of your financial life are discussed. This proactive engagement provides clarity and confidence in your financial trajectory, transforming a routine check-up into a strategic deep dive.

Reviewing Your Financial Health

An annual financial review starts with examining your income and expenses. Understanding how your income and spending align with your financial goals is foundational. Ask your advisor how current cash flow supports or hinders your long-term objectives and if budget adjustments could enhance progress. This discussion can reveal areas where spending might be optimized to free up funds for savings or debt reduction.

Assess the adequacy of your emergency savings. Inquire about your emergency fund balance and if it meets recommended guidelines (typically three to six months of essential living expenses). Discuss any potential gaps and strategies to build or replenish these funds, such as automating savings contributions. An emergency reserve buffers against unforeseen events like medical bills or job loss, safeguarding your financial plan.

Discuss debt management. Review all debt types, including credit cards, mortgages, and student loans. Ask your advisor about current debt reduction strategies and if alternatives like consolidation or prioritizing high-interest debts could accelerate progress. Understanding debt’s impact helps formulate a plan for managing and reducing liabilities.

Discuss the effectiveness of your budgeting practices and cash flow. Ask if your advisor sees opportunities to improve how your money flows, ensuring it serves your financial aspirations. This could involve questions about tracking tools, spending categories, or ways to increase savings rates. Understanding budgeting and cash flow ensures you live within your means while progressing towards your financial goals.

Assessing Investment Performance and Strategy

Discuss your investment portfolio’s performance. Ask how your investments performed over the past year against relevant benchmarks and your personal financial goals. These comparisons help determine if your portfolio is on track or needs adjustments. Review overall portfolio returns and individual asset performance.

Review your asset allocation and its alignment with your risk tolerance and time horizon. Ask if your portfolio’s mix of assets still suits your risk comfort and timeline. Market fluctuations can shift allocation, making periodic rebalancing important to maintain your desired risk profile. Discuss whether your current diversification strategy adequately spreads risk across different asset classes, industries, and geographies.

Discuss your investment strategy and potential adjustments based on market conditions or personal changes. Ask your advisor to explain the strategy’s rationale and how it supports your long-term objectives. If market conditions changed, inquire about proposed strategy shifts and their potential impact on your portfolio. This proactive discussion ensures your investment approach remains responsive to evolving circumstances.

Ask your advisor about current market trends and their potential impact on your investments. Ask about their market outlook for the upcoming year and how your portfolio is positioned for various scenarios, including potential downturns. Discuss their investment philosophy, including diversification and low-cost investments, for insight into navigating market volatility. This conversation can help you anticipate opportunities or risks and understand the contingency plans in place.

Addressing Key Life and Financial Planning Areas

Tax planning is integral to your financial review, as financial activities significantly impact your tax obligations. Inquire about strategies to enhance tax efficiency within your portfolio and financial plan. This includes maximizing contributions to tax-advantaged accounts (401(k)s, IRAs, HSAs) and understanding their contribution limits. Discuss if strategies like tax-loss harvesting (selling investments at a loss to offset capital gains) or Roth conversions might be beneficial for your situation.

Estate planning ensures assets are distributed according to your wishes and can minimize probate complexities. Ask about the status of your will, trusts, and beneficiary designations for accounts like IRAs and life insurance. Confirm these documents reflect your current intentions and recent life changes. Your advisor can help align your estate plan with your financial plan, addressing protecting loved ones and documenting wishes.

Assess the adequacy of your insurance coverage. Review life, disability, and long-term care insurance policies to ensure sufficient protection for you and your dependents. Discuss if coverage levels meet current needs and if adjustments are warranted due to changes in health, family, or financial responsibilities. Adequate insurance acts as a safeguard against unexpected financial burdens.

Discuss how significant life events might affect your financial plan. Life changes like marriage, birth of a child, career transition, or inheritance can have substantial financial implications. Ask your advisor to model their financial impact and adjust your plan accordingly. This proactive approach ensures your financial strategy remains flexible and responsive.

Understanding Your Advisor’s Role and Compensation

Clarify your financial advisor’s fee structure for transparency. Inquire how your advisor is compensated. Common models include assets under management (AUM) percentage, hourly rates, flat fees, or commissions. Understanding these details helps assess the costs of your financial guidance.

Understand your advisor’s communication plan. Ask about preferred methods and frequency of communication (in-person, phone, email). Clarify how often you’ll receive portfolio updates and market insights. Clear communication expectations ensure you remain informed and confident.

Discuss your advisor’s future plans and how they will continue supporting your financial journey. This includes questions about their professional development or succession planning, providing reassurance about relationship continuity. Understanding their ongoing commitment helps build a lasting partnership focused on your financial well-being.

Review your responsibilities as a client. Ask what information or actions you need to provide for the plan’s successful implementation and effectiveness. This clear delineation of roles helps maintain a productive, collaborative relationship. A financial plan is a dynamic tool requiring ongoing input from both you and your advisor to adapt to changing circumstances.