Essential Questions to Ask Your Financial Advisor to Enhance Portfolio Performance

This content has been reviewed and edited by an Investment Advisor Representative working for Global Predictions, an SEC-registered Investment Advisor.

Effectively navigating your investments often relies on the advice you receive from your financial advisor. While this professional guidance is typically valuable, the key to feeling more confident and trying to enhance your portfolio’s performance is through engaging in detailed and meaningful discussions. Below are several engaging inquiries you might consider to ensure that your investments align with your financial aspirations and risk profile.

1. How Does My Portfolio Align with My Financial Goals?

Consider discussing how your investments overlap with your personal financial targets. This conversation should address areas such as risk tolerance, anticipated returns, and investment timeframes, which can help in understanding how your strategy aligns with your objectives - especially for an advisor that doesn’t build a unique portfolio for each client.

2. What Costs Are Linked to My Portfolio?

Understanding the full range of associated investment costs is crucial. Discuss all relevant fees, including management fees, fund fees, transaction fees, withdrawal fees, and any other potential expenses that may affect your returns, to gain clarity and explore opportunities to minimize unnecessary costs where possible.

3. How Is My Investment Portfolio Diversified?

Risk management through strategic diversification is pivotal. Discuss the scope of diversification in your current portfolio—across asset classes, sectors, and geographies—and how this is designed to fit your risk tolerance and investment objectives. Try to get your financial advisor to show you multiple backtests and other investments they considered but didn’t include.

4. Can We Evaluate My Portfolio’s Relative Performance to Benchmarks?

Gaining insights into how your portfolio performs relative to chosen benchmarks can be enlightening. Review which benchmarks are used, the rationale behind their selection, and discuss how your investments are performing in comparison. Feel free to ask for comparisons to your own chosen benchmark - and make sure the risk of the benchmark matches your portfolio’s risk (it's possible to outperform a benchmark over a short period of time simply by increasing risk).

5. What Is the Strategy for Adjusting the Portfolio?

As financial markets evolve, so might the need to adjust your portfolio. It could be beneficial to understand the scenarios under which adjustments might be considered, including the rationale for potential consolidations or diversifications. Just as important is what would cause the portfolio to not be changed (you want to avoid “churning” the portfolio).

6. How Is Updated Market Information Factored into My Investment Strategy?

It is advisable to know how frequently, and why, your investment strategy might be updated based on new market information. Discuss how your financial advisor integrates updated economic and financial data into making informed investment decisions.

7. What Are the Possible Risks Associated with My Current Investment Strategy?

Each investment strategy involves certain inherent risks. Discuss the specific risks associated with your current investment setup, including macro market, credit, and liquidity risks. You might be taking too much, or too little, risk.

8. How Is Technology Used to Support My Portfolio's Performance?

The integration of technology in investment management can be significantly beneficial. Services such as PortfolioPilot use modern tools to assist in portfolio tracking and optimization, potentially offering enhancements to portfolio management. Discuss how such technologies could be employed in the context of your investments.

Moving Forward

Actively inquiring and participating in discussions about your financial strategy is a proactive step toward aligning with your financial goals. As investment management continues to evolve, incorporating advanced methodologies and technologies, staying informed and engaged is crucial. This approach helps ensure that you are well-positioned to meet your financial aspirations and adapt to the changing financial landscape.

Continuous engagement with your financial advisor is crucial for effectively managing your investments and navigating the complexities of the financial markets responsibly.