How do you feel about honestly answering sensitive questions with your financial advisor? Sometimes, even with a trusted advisor, it can feel uncomfortable to share your answers.
The intention behind this ask, however, is not meant to be invasive. Nor is it outside the scope of what financial advisors need from you. According to a July 2023 article published by The Globe and Mail, financial advisors will ask their clients questions regarding their personal lives to ensure they’re putting together the most effective financial and estate plans possible.
GOBankingRates chatted with Amy Irvine, CFP at Rooted Planning Group, and Louis Barajas, CFP and co-founder of International Private Wealth Advisors (IPWA), to find out the challenging questions financial advisors ask their clients and why they do it. Here’s why your advisor needs to ask these five uncomfortable questions.
What Is Your First Money Memory?
Every person comes from a unique financial situation. While some may not find this question uncomfortable, others who experienced poverty or low-income situations growing up may feel embarrassed about sharing the details.
Asking this question, Irvine said, is meant to help financial advisors understand the client’s money philosophy. Having this understanding is important to reach big financial goals like paying off debt, buying a home, saving for college and estate planning.
“People can come to the table with trauma around money,” said Irvine. “It’s important for me to understand the connections.” Irvine adds that this is especially true for financial advisors working with couples who have very different ideas around money and finances.
Why Aren’t You Saving Enough?
This may sound like an extremely blunt question, but it’s not meant to be taken personally.
Barajas said this question is needed to align the client’s financial behaviors and beliefs with their finances. If he doesn’t feel like a client is being honest with him, or even with themselves, he uses this phrase to encourage honesty: “All progress begins by telling the truth.”
Do You Have Any Health Issues?
Asking questions about a client’s health and lifestyle is common practice with financial advisors. As an example, Irvine said if a married client is not in good health, a financial advisor may suggest structuring assets in a certain way. This helps protect the spouse who does not have the health issues.
How Do Your Money Habits Align With Your Spouse’s?
This question is specifically for clients who are getting married or are already married. Asking this question allows financial advisors to learn more about the couple’s money mindset and discover who saves and who spends in their relationship. The advisor will be able to better determine which financial topics the couple is on the same page about and areas where they do not see eye to eye.
Barajas also recommends asking if there are any “elephants in the room” when discussing finances with your spouse. If a client is getting married, an advisor may ask if they have seen an attorney to discuss a prenuptial agreement.
What Keeps You up at Night When It Comes to Money?
Even if answering this question feels uncomfortable, it’s incumbent for the client to answer honestly. Do not give your advisor an answer you think they might want to hear or you think others might use as their response.
While financial advisors may work with clients who “look” similar financially, Irvine said one little detail or value can change the recommendation an advisor makes to each of these individuals. As a result, they may end up with a recommendation that is ultimately wrong if they aren’t completely honest.
“As financial planners, we need to understand the big picture in order to give recommendations that are meaningful to our clients,” said Irvine.
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