Answers to the 8 Most Common Money Questions Financial Advisors Get Asked

A financial advisor can help tailor a plan specific to your situation and needs, as no financial advice is one-size-fits-all. With that said, there are some common questions financial advisors tend to get asked by a variety of clients.

GOBankingRates spoke to financial advisors to find out the money questions they get asked again and again — plus, their answers to these commonly asked questions.

Austin Winsett, CPA, senior wealth advisor at Exencial Wealth Advisors, said that many of his clients are worried about the possibility of an upcoming recession. However, he advises his clients that they should stay the course despite market downswings.

“We don’t believe markets can be timed repeatedly and successfully,” Winsett said. “Commonly quoted studies have shown that getting out and ‘waiting to see what happens’ results in worse returns than riding out a decline. People frequently hear that the best days tend to quickly follow the worst market days, and that time in the market is more important than market timing. There are stories of those that get lucky, but most approaches sell equities too early in a rising market, re-enter too soon in a falling market, create ‘whipsaw’ losses by selling low and buying back in higher, etc. Realistic results will typically gain some degree of outperformance in a falling market at the expense of lower returns in rising markets or losses during periods of sideways volatility with no clear trend.”

“We instead focus our investment philosophy and strategies on a client’s plans, goals and cash needs,” he continued. “We ensure that when we do have periods of heightened market volatility, we have a war chest of more stable assets or alternatives to source cash needs so that we are not forced to sell equities at an inopportune time to meet short-term and long-term cash flow needs.”

Despite his clients’ fears, Winsett doesn’t see this happening.

“It’s hard to see why it would, and why other countries would suddenly stop reserving with U.S. dollars,” he said. “Simply put, the dollar isn’t valuable because other countries use it. Many countries use it because it is valuable and stable. The dollar makes up the vast majority of central bank foreign exchange reserves with the euro a distance second. Close to 90% of global foreign exchange trading involves the U.S. dollar, while the majority of the currency circulates outside of the country. That isn’t because the U.S. currency is a perfect currency. It’s because compared to other foreign currencies, the dollar is the nicest house in the neighborhood. Overall, we don’t think it’s an issue that should enter our long-term investment decision-making.”

“Life Insurance can be a good investment, but every client’s needs are unique,” Winsett said. “Those who have substantial savings and investments may be ‘self-insured’ and not need the additional coverage. While whole-life policies can provide some flexibility by having a cash balance that builds up over time that can be drawn or borrowed from, these policies tend to have higher fees and can cause drags on performance over time. For investors that are younger, term life insurance can be a way of obtaining great coverage for those in accumulation mode, and provide a source of income replacement if something was to happen to an individual or spouse, while at much more reasonable costs. Having enough to at least cover a home mortgage and college for children is a good starting point for some families.”

Charles Crilly, president and financial advisor at Ivory Wealth Management, said this is the most common question he gets asked.

“The answer varies for each client,” he said. “There are many variables that play an important role in determining how much money people will need. That includes debt, spending habits, goals during retirement, anticipated incomes, healthcare costs, and on and on. We take the time to review all of these things, and then come up with several different scenarios that are tested for probabilities of success.”

Many clients are unsure about what to do in a bear market. Here’s what Betty J. Schuster, CFP at Schuster Financial Services, LLC, advises: “Throughout history, there have been times of uncertainty, including the assassination of presidents, financial crises, pandemics and wars. Having a written financial plan keeps you on track and centered during these times to achieve your long-term goals. The current uncertainty is no different. Regularly reviewing your plan and adjusting when warranted keeps it up-to-date and relevant to what is happening today.”

Schuster said that she often advises clients on how to leave a financial legacy.

“There are many aspects to wealth preservation, including tax planning, investment portfolio monitoring and managing risk; however, an important part of wealth preservation is knowing your family and loved ones,” she said. “What are their financial management abilities? Do they have the expertise needed to manage your wealth going forward? Do they need to be protected from themselves? Based on the answers to these questions, we design a plan — in coordination with your tax and legal advisors — using trusts and agreements that allows what you have accumulated to continue to provide for your family beyond you.”

When clients are expanding their families, Schuster tells them that “everything starts with the financial plan.”

“The plan is the road map that gets you to your destination — financial security and success for your young family,” she said. “Based on your communicated financial goals, we work together to develop action steps for accumulating assets and protecting you from risks. Your progress is regularly monitored, and adjustments are made to accommodate job, business and family changes.”

Terry Stanfill, accredited asset management specialist and president at RLM Financial Services, Inc, said that his clients often ask how he invests his own money — and for him, the answer is equities.

“For more than 34 years now, I have been an equities advisor,” he said. “I believe in equities. Of course, we have an asset allocation model, but whenever possible and appropriate, we use equities above all. For decades, I have preferred and done U.S. large-cap growth and value.”

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