7 Questions to ask your financial advisor or private banker

Making the decision to entrust your hard-earned money to a financial advisor in Hong Kong is not one to be taken lightly. Start by asking the right questions upfront to better understand if a financial advisor is truly working for your benefit. The bottom line is; don’t be afraid to demand the transparency and fiduciary duty you duly deserve. 

To help you with finding a good wealth or financial advisor, we have curated a list of essential questions that can help you find the right financial advisor. 

How can I find the ideal financial advisor?

To help you identify potential conflicts of interest and allow you to make an informed decision in selecting an advisor who truly prioritises your financial future for you, the below outlines the seven essential questions you should ask any wealth advisor before entrusting them with your money. 

1. “How do you and the bank or platform you work with make money?”

If your financial advisor earns one-time or recurring commissions, trailer fees, or retrocessions from the investments they recommend, it may be a concern if the advice rendered is in your best interests. Many advisors are incentivised to push products that generate the highest commissions for them, not necessarily the best returns for you. 

Fee-only advisors who charge flat fees or a percentage of your assets are less likely to push specific products regardless of suitability or a product’s investment merits as they are not paid different commissions for different products you buy. 

2. “Do you earn commissions on the products you recommend?”

Commissions are paid by fund management companies to fund distributors on an ongoing basis for as long as an investor stays in the fund. As a commissions-remunerated salesman, your distributor will be incentivised to sell you funds that pay higher "trails", as the fees are called in industry lingo, and not necessarily the top-rated or most suitable fund that can help you achieve your investment goals.

Beyond commissions, some advisors may not disclose additional fees that come with their investment selections like high management fees, performance fees, and exit penalties. Be sure to understand all the fees associated with any recommendations before proceeding.

3. “Is the revenue generated for the organisation linked to your overall compensation?”

Understand also individual advisors’ complete compensation structure. Salaried advisors with bonus incentives based on your portfolio’s performance may be more aligned with your goals. 

Commission-heavy structures that are tied to product sales and encourage excess trading to generate more fees pose more conflicts of interest.

4. "How do you evaluate and shortlist investment options?"

Moving onto investment solutions, ask your financial advisor to walk you through exactly how they research, analyse, and choose the investment products they recommend to clients. 

Look for a rigorous, thoughtful process focused on your financial goals and risk tolerance. If their approach seems superficial or primarily based on short-term performances or without consideration of your investment horizon, that is a red flag.

5. “What is the breadth of investment options that are available for me?”

You should understand if their recommendations come from a restricted list of options or if they consider a broader array outside of even what they may have based on your needs. The latter is seen as better. 

Access to a narrow range of investment options from a select group of fund managers or product providers significantly limits their ability to find the most appropriate solutions for you, and may limit your access to opportunities better suited for your unique circumstances.

6. “How do you ensure that the advice you give me is consistently aligned with my financial goals?”

Find an advisor who would tailor recommendations to suit your unique goals and needs and aim by understanding what matters most to you, and who will periodically review it with you. Whether it is saving for retirement, funding your children's schooling, or building generational wealth, a customised strategy is a good start for you to fulfil your objectives — even as they change with your life stage.

7. “How often do you review my investments and what should I expect?”

Ask about the frequency and depth of portfolio reviews, performance reports, and market updates they provide. These reports are crucial to verify that your advisor aligns with your financial goals and that investments are on track. Choose an advisor who values transparency with clear, consistent reporting and actively addresses concerns. 

Your initial advisory session is only a snapshot of your needs today, which will evolve as personal circumstances change.

What makes a good financial advisor?

By asking tough questions about how your advisor is incentivised and watching for signs that their recommendations serve their own interests over yours, you can determine if you have found someone truly acting as your fiduciary. 

As you go through these questions, if their answers suggest any misalignment of interest and other issues, feel confident in your decision to look elsewhere. 

An independent financial advisor, operating on a fee-only basis, is more likely to prioritise your financial well-being. Unlike advisors compensated through commissions from selling financial products, independent advisors are free from such conflicts, ensuring their advice is unbiased and tailored to your specific financial situation.

The advantages of partnering with a fee-only advisor extend beyond impartial advice. This model fosters the creation of personalised, holistic wealth plans among other bespoke strategies. 

Endowus, an independent advisor you can trust

Endowus is an award-winning independent fee-only wealth & fund platform. Licensed in Singapore (MAS 101051) and Hong Kong (SFC BQR225), Endowus is the first digital advisor in the region to span private wealth and public pension (CPF & SRS in Singapore). 

We believe aligned incentives lead to better motives, choices, business models, advice, outcomes and lives. Uniquely, Endowus is not compensated through subscription fees, transaction fees, leverage, or recurring trailer commissions, so the firm and its people are not incentivised to churn, push leverage, or push high-commission products.

Endowus can only make a clean, transparent, assets-based Endowus Fee (of 0.25% to 0.60% per annum) directly from our clients (what the industry calls “fee-only”) to be only incentivised to grow our client’s wealth. 

To ensure independence and alignment, we innovated 100% Cashback on trailer commissions not only to lower client costs, but importantly to ensure our assessment and selection of investment strategies are based on merit, and that the advice we provide is based on our client’s goals, not the amount of trailer commission collected for distribution.

When our clients succeed, we succeed. To get started with Endowus, click here.

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